The European Central Bank has published its supervisory priorities for the three-year period from 2025 to 2027, placing banks' capacity to withstand severe macro-financial and geopolitical shocks at the centre of its oversight agenda. The document, issued by the Single Supervisory Mechanism on 12 December 2024, sets out the areas in which significant institutions across the euro area are expected to demonstrate the greatest improvement in the near term. The publication follows a pattern of annual priority-setting that has evolved considerably since the SSM assumed direct responsibility for supervising Europe's largest banks, and the 2025–27 framework reflects the more complex risk environment that has emerged from a period of elevated inflation, rising interest rates, and geopolitical fragmentation.
The priorities confirm that the ECB will sustain and intensify two enforcement campaigns that have occupied supervisors for several years: one focused on climate and environmental risk management and the other on the quality of risk data aggregation and reporting. Both areas have generated formal supervisory actions in recent cycles, and the new framework makes clear that the regulator intends to sharpen those tools considerably in the period ahead, moving from guidance and dialogue towards more consequential supervisory measures for institutions that fall behind agreed remediation timelines.
GEOPOLITICAL RESILIENCE TAKES CENTRE STAGE
The ECB's framing of its 2025–27 programme reflects the elevated uncertainty that has characterised the European economic environment throughout 2024. Supervisors have identified resilience to immediate macro-financial threats and severe geopolitical shocks as the overarching objective, a formulation that encompasses credit quality deterioration, funding market stress, and the operational risks arising from geopolitical fragmentation across the continent and beyond. Institutions are expected to demonstrate that their capital and liquidity buffers, as well as their stress-testing frameworks, are calibrated to scenarios that would have seemed extreme only a few years ago. The regulator is particularly attentive to the potential for shocks that materialise quickly and simultaneously across multiple risk dimensions.
The priority given to geopolitical resilience also reflects supervisory concern about banks' exposures to jurisdictions that have come under increased political or economic strain, as well as the concentration risks that can arise when lenders rely heavily on particular counterparties or market segments for funding and revenue. The SSM has indicated that its supervisory review and evaluation process will place greater emphasis on assessing how institutions have stress-tested these scenarios and what contingency arrangements they have put in place to manage rapid deterioration in operating conditions.
PENALTIES LOOM FOR CLIMATE AND DATA LAGGARDS
On climate and environmental risk, the ECB has confirmed it will continue enforcing compliance with remediation plans through periodic penalty payments for institutions that miss agreed deadlines. The SSM began imposing such payments on a small number of banks in 2024, and the 2025–27 priorities indicate that this approach will be applied more broadly if banks fail to demonstrate adequate progress in integrating climate and environmental risk into their governance, risk appetite frameworks, and internal control processes. The regulator has made clear that the period of purely qualitative dialogue on climate risk management is drawing to a close.
Equally significant is the ECB's stated commitment to stepping up pressure on banks that have not yet met risk data aggregation requirements, which have been embedded in supervisory expectations for more than a decade but remain incompletely implemented at a number of institutions. The regulator has indicated that potential sanctions are available for persistent underperformers, a signal that patience with slow-moving remediation programmes is running thin as the 2025–27 cycle begins. Banks that have treated data governance as a secondary priority relative to commercial and capital concerns may find that calculation increasingly costly to sustain.