Forward-looking supervision

With respect to more forward looking supervision, resources have
increased in specific risk areas, particularly for qualitative horizontal reviews and IT
supervision; BaFin and the Bundesbank are paying more attention to banks’ business models,
primary business functions and associated risks; and supervisors are increasing the attention
devoted to the risk management function in banks.

The authorities acknowledge that
additional supervisory efforts need to be directed at assessing the effectiveness of boards and
the risk culture at (large) banks, given their importance as indicators for the risk taken by
those institutions. Both BaFin and the Bundesbank indicate that they will incorporate criteria
set out in forthcoming guidance from the EBA and ECB on the assessment of business
models 23 into their own supervisory review activities.

Concerning the supervision of SIFIs,
the identification of domestic systemically important banks is underway, with first drafts of
recovery plans currently being assessed by BaFin and the Bundesbank for 21 banks.