BaFin and the Bundesbank should continue to strengthen
their supervisory practices to ensure the early and comprehensive identification of
risks within each institution. This includes inter alia enhancing business model and
risk culture analysis; ensuring that supervisors are aware of major acquisitions by
supervised banks and are able to take necessary actions at an early stage in
response to their impact on banks’ risk profile; increasing credit risk expertise to
enhance the oversight of non-IRB aspects of credit risk; incorporating liquidity risk
scenarios in their stress testing framework; and increasing the number and scope of
on-site inspections for insurance companies.
Timely and Effective Intervention: Once key risks within institutions have been identified,
timely and effective supervisory intervention that is commensurate with the nature and
severity of the identified issues is critical to ensure that the institution takes appropriate
corrective actions. An important tool in this respect is a “ladder of supervisory actions”.