driver of the increased capitalisation has been the post - crisis strengthening of the regulatory framework. but it is also important to note that the shocks that have hit european economies in recent years have largely been buffered by fiscal and monetary policy, thus shielding the banks from their full impact. the third factor at play is robust liquidity. banks'liquidity coverage ratio increased from 138 % in 2015 to 158 % in 2023. effective liquidity risk management is becoming even more important in the current environment. the monetary tightening that began in july 2022 followed years of highly accommodative monetary policy and ample liquidity provision. moreover, heightened geopolitical risks are not fully priced in by markets, which may lead to abrupt market reactions following negative news. 2 / 7 bis - central bankers'speeches however, even if banks may meet capital and liquidity requirements, this will not shield them from the impact of adverse shocks if risk management systems and governance are ineffective. this is one of the key lessons from the turmoil on international banking markets in march 2023. the fourth factor is thus improving governance and risk management, which has been a priority for european banking supervision in recent years. while progress has been made here, more needs to be done. strong internal governance and effective strategic steering remains one of our top supervisory priorities. we will soon publish a guide on governance and risk culture, including examples of good practice in this field. overall, there is no room for complacency. risk management in banks needs to continue focusing on forward - looking risk assessments and sustained resilience, including capital, liquidity and operational resilience. european banking supervision needs to foster this sound risk management in banks and ensure sufficient resilience. the risk environment in which banks operate has evolved substantially in recent years. it and cyber risks, for example, are on the rise : the number of reported cyber incidents at european banks doubled from 2022 to 2023. 5 and these attacks have become more sophisticated. they can heavily disrupt the functioning of banks, with potentially significant financial, reputational and legal implications. this is why european banking supervision has flagged this topic as a key priority. the results of this year's cyber resilience stress test will be published later this summer. it is important to note that many changes are not merely cyclical ; they are in fact structural. becoming climate neutral requires changes in relative prices for co2intensive activities and in the patterns of production and consumption

will be further improved to maximise synergies. this will also provide banks with a clearer overview of supervisory plans, thereby making supervision more predictable and more transparent. 3. using the full supervisory toolkit : the european legal framework provides several tools that can be used to ensure that risks are mitigated. these tools differ in their intrusiveness. moral suasion and operational letters are the softest, least intrusive tools. sanctions, higher capital requirements and periodic penalty payments are more intrusive tools. in the reformed srep, supervision will become more effective and intrusive by using the full range of supervisory tools. 6 if identified weaknesses are not sufficiently remediated, ecb banking supervision will expeditiously increase the severity of supervisory tools and swiftly move up the escalation ladder. in addition to issuing binding quantitative requirements, this includes making wider use of legally binding qualitative requirements and enforcement measures such as periodic penalty payments. this is particularly relevant for areas in which banks have left supervisory findings unaddressed for too long. let me give you an example. there is a large number of outstanding findings for weaknesses in risk data aggregation and reporting – the lowest - scoring sub - category in the area of internal governance in the 2022 and 2023 srep cycles. this is not just a technical issue, but one that can have severe implications for banks'decision - makers when identifying and steering risks. 4. enhancing communication : supervisory communication to banks needs to be clear and concise. but srep decisions can be long documents. in 2021, ecb banking supervision introduced executive letters to facilitate better communication with banks about key priorities. in the future, srep decisions will be more focused, clearly outline supervisory expectations and include strong measures when needed. reducing the length of srep decisions will not, however, compromise their legal clarity or enforceability. the length of decisions will continue to vary across banks, depending on their specific situation and risks. 5. making methodologies more stable : good supervision is based on consistent and robust methodologies. starting from very different practices across countries, european 5 / 7 bis - central bankers'speeches banking supervision has made significant progress in developing common methodological approaches, thus making supervision more predictable and more transparent. at the same time, our methodological framework is complex – reflecting the complexity of modern banking. this complexity can be costly, for both supervisors and banks, as analytical capabilities need to be built up and maintained. we