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claudia buch : hearing at the european parliament's economic and monetary affairs committee introductory statement by prof claudia buch, chair of the supervisory board of the european central bank, at the european parliament's economic and monetary affairs committee, brussels, 21 march 2024. * * * i am delighted to be here for my first hearing as chair of the supervisory board of the ecb and to report to you on the activities and priorities of ecb banking supervision. today, i will focus on three points concerning the banking outlook, our supervisory priorities and the completion of the banking union. first, the european banking sector has coped well with the shocks of the recent past, but faces new risks in a changing external environment. second, ecb banking supervision will remain agile and proactive in addressing these risks. and third, i would like to thank you for all the work you have done over the past parliamentary term to move the banking union forward. efforts to complete it are needed now more than ever in order to further increase the resilience and integration of the banking system. the european banking sector faces new risks in a changing external environment euro area banks have robust capital and liquidity positions. this is underscored in the ecb annual report on supervisory activities 2023, which was published today. the aggregate common equity tier 1 capital ratio of significant institutions was 15. 6 % in the third quarter of 2023, which is higher than at the start of the banking union in 2015, when it was 12. 7 %. the leverage ratio has increased slightly to 5. 6 % ( from 5. 4 % in 2016 ). the aggregate liquidity coverage ratio stood at 159 %, which is higher than before the pandemic, when it was 140 %. non - performing loans accounted for less than 2 % of total outstanding loans in 2023. bank profitability and valuations have increased, also reflecting higher interest rates. at the same time, the evolving economic and financial landscape, along with geopolitical risks, is challenging the resilience of european banks. the profit outlook for banks may deteriorate if funding costs increase, loan growth weakens or losses materialise. losses from exposures to sectors particularly sensitive to interest rate changes may rise. in the first three quarters of 2023, non - performing loans were already increasing gradually, driven primarily by commercial real estate loans and consumer credit loans. bank are operating under a high degree of uncertainty, owing to geopolitical