Unlocking supervisory effectiveness in credit risk: insights from the ECB’s supervisory findings and measures
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Working paper assessing supervisory effectiveness in credit risk using 8,106 ECB supervisory measures (2016-2025), with a language model used to measure whether deficiencies were remedied.
Key points
- Measures on data, reporting and IT are less likely to be fully remedied and take longer
- Measures arising from on-site inspections are remedied more often and sooner
- Better bank governance is associated with better remediation outcomes
Who is affected
Banking supervision; banks with open credit risk findings
Plain-language version
An ECB study (the ECB is the euro area's central bank and supervises the big banks) looks at 8,106 orders it gave banks between 2016 and 2025 to fix weaknesses in how they lend. Using AI, it finds that data and IT problems take longest to fix, and that on-site inspections get better results. Better-run banks fix things faster.
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Summary produced with artificial intelligence from the official publication. It may contain errors: always check the original document.
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