digitalisation is fundamentally transforming the provision of financial services. as information processing is a key economic function of banks, digitalisation is a game changer. maintaining up - to - date, secure it systems is essential for banks to compete successfully. at the same time, cyberattacks on banks have become more frequent and 1 / 4 bis - central bankers'speeches severe. 2 this year, we conducted a cyber resilience stress test to evaluate banks'ability to withstand a severe but plausible cyberattack. it revealed that banks generally have response and recovery frameworks in place, but improvements are needed. 3 the results of the stress test will inform our annual assessment of banks'health, the supervisory review and evaluation process. second, the impact of adverse geopolitical developments on banks is reflected in our supervisory priorities for 2024 - 2026. geopolitical events differ from more traditional risk drivers because they are highly uncertain and insufficiently reflected in historical data. nevertheless, they transmit into increased credit, liquidity, market, and operational risks, for example by disrupting value chains or third - party service provision. banks must therefore use scenario analyses and factor uncertainties into their capital planning. they may also need to reassess their geographical exposures and outsourcing strategies. third, bank resilience to climate and environmental risks must be strengthened. by the end of this year, banks must meet our supervisory expectations for managing such risks. 4 let me stress that elected governments and legislators are responsible for climate policies. however, it is within our mandate to ensure that banks manage physical and transition risks effectively. when we began our work on climate and environmental risks about five years ago, the vast majority of banks had hardly addressed them. although significant progress has been made since then, there is still much work to be done. as uncertainty remains high across all these areas, maintaining and strengthening bank resilience overall will continue to be our supervisory focus. resilient banks can respond to shocks without disrupting the provision of financial services, jeopardising financial stability or requiring ad hoc policy interventions. resilience encompasses several dimensions – sound capital and liquidity positions, up - to - date it systems, and operational resilience. these require long - term funding. currently, profit levels are relatively high, which provides a good opportunity for banks to invest in strengthening their resilience. the upcoming implementation of basel iii will further enhance bank resilience. the swift and faithful implementation

claudia buch : introductory statement - public hearing at the european parliament introductory statement by prof claudia buch, chair of the supervisory board of the european central bank, at the hearing of the committee on economic and monetary affairs of the european parliament, brussels, 2 september 2024. * * * thank you very much for the opportunity to exchange views with you, the members of the newly elected european parliament's committee on economic and monetary affairs. providing our perspectives on the european banking sector is crucial for our transparency and accountability. let me begin with our assessment of the state of the banking sector, bearing in mind that the economic environment in recent years has been far from favourable. the pandemic, the energy supply shock following russia's full - scale invasion of ukraine, and high inflation have exposed european economies to unforeseen challenges. in the face of these challenges, europe's banking sector has shown resilience. banks possess capital and liquidity buffers that would enable them to absorb potential losses and adverse shocks. bank profitability has benefited from higher interest rates, which is reflected in higher valuations of bank stocks. however, the effects of this supporting factor are gradually diminishing. improved bank resilience has been driven by two factors. the financial sector reforms implemented in the aftermath of the 2008 financial crisis have strengthened banks without compromising their lending capabilities. in addition, banks have indirectly benefited from policy support which has helped shield the real economy from recent adverse shocks. corporate insolvencies and associated loan losses have thus been contained. as a result, banks currently find themselves in a situation that is markedly different from the early days of banking union a decade ago. in 2015 the average ratio of nonperforming loans for significant institutions was 7. 5 % 1, with some banking systems experiencing ratios close to 50 %. by march 2024, this ratio had decreased to 2. 3 %, with a significant decline in differences across countries. banks'capital ratios have improved, particularly in terms of risk - weighted ratios. the common equity tier 1 ratio for significant institutions rose from 12. 7 % in 2015 to 15. 7 % in early 2024. but we cannot be complacent : the macro - financial and geopolitical environments have changed significantly. banks must navigate new risks and structural changes, and loan losses may increase. therefore it is vital that resilience is maintained. with this in mind, our supervisory agenda focuses on three areas. first,