 OK, so my colleagues tell me I can start. Well, welcome to everybody. Good afternoon, and welcome to this seminar on the evolution of European banking supervision. So my name is Connie Lotze, and I work in on banking supervision communications. And I'm very happy that you're joining us for this session. Let me just say a few words, and then I will say something on housekeeping, which you probably know, and I'll introduce my esteemed colleagues who will then lead the session. So as you know, ever since the great financial crisis, the ECB and the national supervisor have been working on keeping the banking system safe and sound. I mean, we're almost 10 years old now. Our consistent and standardized supervision throughout the euro area helps keep people's money safe and ensures that the banks can weather a crisis and continue to perform their vital functions, such as granting loans to people and firms and into the economy. So since 2014, as I said, this has been our mission. In the last decade, we have indeed weathered a few storms, and the banking and the European banking sector has shown remarkable resilience. This underlines, obviously, the need for and the effectiveness of the enhanced regulatory and supervisory reforms that we have implemented. And our style of supervision has adapted to this ever-changing external environment and has allowed us to get through these difficult periods, such as the COVID-19 pandemic and, more recently, also the Russian invasion of Ukraine. So over the next hour, my colleagues here on this panel and will discuss these issues with you and answer your questions. And I'm happy to take your comments. A couple of housekeeping rules before, after the presentation, we will go to your questions and your comments. We would encourage you to turn on your camera so we can see you, because right now we're speaking sort of into a black hole here. But that's OK for now, because we will have this presentation by our colleagues. If you have any technical problems, please write to host in the chat box, and a member of our team will assist you right away. And one last thing, this seminar is being recorded and will be published on our website in the coming days. So now let's come to our speakers. I'm very happy to have with me here Lynette Field, who is the Director General of Onsite and Internal Model Inspections, and Sofia Toscano-Rico, who is Deputy Director General of Horizontal Line Supervision. So they will present to you the origins of a single supervisory mechanism, the evolution of supervisory approach, talk about the priorities, and touch a bit on the bank situation in light of the March 2023 turmoil. And then the second part, as I said, we will come to your comments and questions. So now, without any further ado, I'm very happy to hand over to Lynette and Sofia. And I think Lynette will start the presentation, please. Thank you very much, Connie. And also, good afternoon from my side. I think this is a really very welcome opportunity for us to engage with civil society organizations. So very much looking forward to the session. I believe the colleagues should be able to see the slides. As Connie said, Sofia and I will go through how banking supervision has evolved since the SSM was created and also a little bit about where we think it's heading. We will also share some reflections about the state of the banks, the current supervisory priorities, and also some reflections about the impact of the turmoil that we experienced in March. So I'm going to move to this slide. And this is really recalling a little bit of history. Where did European banking supervision come from? We had, of course, the global financial crisis starting around 2007. And in the early 2010s in Europe, we had the sovereign debt crisis. And those revealed some important weaknesses. First of all, in the banks themselves, what we saw was that the capital and liquidity buffers of the banks were insufficient. But even more fundamentally, their risk management governance was insufficient. And also, there were some excessive risk taking in the banks. There were also clear weaknesses in the framework for dealing with banks that get into difficulties, so banks that get into crisis situations. And that was particularly the case for cross-border large banks. What we were seeing was that there was very much a focus on national approaches, national solutions. And finally, as supervisors, we also had some lessons to learn. Supervision was not as proactive as it should have been. The cooperation between national supervisor authorities was not working as it should. And we had a situation where banks with similar risks were being supervised in different ways. So we had a very extensive set of reforms as a result of these crises. Some of those had their origin in global discussions. And some are specific to Europe. First of all, we had a very large regulatory reform, global-driven regulatory reform, which was focused on raising standards in banks, so capital, liquidity buffers. The buffers the banks need to protect them in case of problems, a focus on improving governance and risk management, new instruments also to deal with risks at the system level, rather than just at the bank level, and instruments for dealing with weak banks. So this was a global reform predominantly. But it was implemented in Europe through the single rule book. And that's an important point, because up until that point, European legislation for banks had been written in the form of directives, which then had to be taken by national governments and national authorities transposed and implemented. So there was always scope for differences. Whereas what we had from 2013 was a regulation on capital requirements that's directly applicable. And it doesn't need to be transposed in any way. We also had the creation of two new European mechanisms to new authorities under the framework of what we call the Banking Union. So we had European supervision, which was the creation of the single supervisory mechanism, or SSM as we call it, and the single resolution mechanism for crisis management and resolution. SSM started working from November 2014 and the SRM from the beginning of 2015. So if we then look at the SSM, what is it and how does it work? Essentially, or in a nutshell, what it is, it's a banking supervision system. It covers the whole banking industry in the euro area countries, plus one country which is joined in what we call close cooperation, which is a mechanism that allows EU countries, which are not euro countries, to join the SSM. And it's actually one of the largest banking supervisory authorities in the world. It's a system, as I said, so it's a system of the ECB together with the national competent authorities. And we make a distinction between two types of banks. We have what we call, or what the regulation calls, significant institutions, which are the largest, more sort of cross-border international banks, if you like, and those are called significant institutions. There are currently 110 of those, and they are covering more than 80% of the banking assets across the SSM. Those banks are supervised directly, and that's done through what we call joint supervisory teams. And those joint supervisory teams are led by the ECB and comprised of ECB and NCA members. For the smaller banks, and there are around 2,000 of those, which is a bit less than 20% of the overall banking assets in the system, these are still supervised directly by the national supervision authorities, or we call them also national competent authorities. So you might hear us refer to NCA's, that's what we're talking about, the national authorities. And the ECB is playing then an oversight role for those smaller institutions. Of course, we also have some horizontal and support functions, so within the ECB we have functions who are giving expertise to our supervisory teams on certain risks. We have on-site methodologies, on-site inspections and methodologies, so we have quite a lot of also horizontal functions there. So that's the SSM. What about the banking system? What's happened in the banking system since the creation of the SSM and since this regulatory reform? I think what you can see on this chart is clearly an improvement in the resilience of the banks. If you look on the left-hand side, this is the capital buffers, you see clear improvement. This is really focusing on the capital, which is of the highest quality, so the most loss-absorbing capital. The middle chart is looking at non-performing loans. So these are loans where there are late repayments or the borrower is unlikely to repay the loan. And this has been a real priority of the SSM since the beginning, because when the SSM started, there were one trillion non-performing loans in the system, and that's a lot. It's something more than 7.5%, I think, of overall loans. And that really has put a lot of burden on the banking sector, and it has meant that the banking sector has not been able to make new lending. It's been really sort of stifled by this high level of non-performing loans, means that the banks are not really able to play their role in financing the economy. So we've had a very tough exercise to bring down the NPLs, and that has been actually quite successful, as you can see on the chart. The chart on the right is more looking at profitability-related topics. And for us, it's important that banks have a sort of sustainable profitability because this is ensuring their resilience over time. This has been a difficult topic to address. What we've seen in recent couple of years are some improvements also linked to interest rate rises. So that's what we've seen in the banks. What about how our banking supervision has evolved? The SSM has been functioning, I mean, officially entered into force in November 2014, so has been functioning for nearly nine years. I would say in the early years, the focus was really on bringing together these supervisory practices that were rather different across the different countries. We've spent a lot of time and energy on bringing those practices together, harmonizing, and also addressing some of the key weaknesses that we saw in the system. So we had a lot of codification of supervisory practices. We prepared a lot of regulations, manuals, frameworks, processes, really trying to get more harmonization. And I would say one of the key achievements there was the common supervisory review and evaluation process, which we call the SREP. And that's a very key process for us as supervisors to look at the bank's risks, the internal controls, and the measures that need to be taken, and also the adequacy of capital and liquidity. It's a super important process, and we were able to find harmonization there. We also ran three very important projects, one of which was before we took over supervision, we conducted a comprehensive assessment looking at the balance sheets and also stressing the balance sheets of the banks that were going to come under our supervision so that we could identify actions that needed to be taken. This was also published. It was also an exercise in transparency. We also focused, as I said, on getting down non-performing loans. And we conducted an extensive review of banks' internal models, so models that they are using to calculate parts of their capital needs and manage their business. So this, as a foundation, I think has served us very well. And we've seen the situation of the banking sector has improved. But now, as we mature as a banking supervisory authority, I think our common practices are much more embedded now. And so we don't need to focus as much as we did in those early years on this codification approaches. But we can really look more towards risk prioritization, risk focus, agility, and accountability. And we've taken a number of initiatives. We've been increasing the flexibility for our supervisors to apply their own judgment, to focus on the priorities, and to address the banks' specific needs. So we've developed a risk tolerance framework and a process for doing the SREP, the supervisory review and evaluation process, over multi-years, which also allows the supervisors to adapt accordingly. We've had an increased push for transparency over recent years, including on SREP methodologies, but also towards the banks in terms of outcomes and messages. And also, as we focus less on this ex-ante harmonization of practices, we have created a new function that looks, are the outcomes of our supervision consistent? Are we being effective in our supervision? This is what we are calling our second line of defense. And that was part of the internal reorganization we had in October 2020. Maybe also to mention, more recently, we commissioned an external review of our SREP process, and that produced some very important and wide-ranging findings and recommendations that we are now discussing and implementing. So that's it. I will now pass to Sophia, who will talk about the SSM priorities and recent events. Sophia. Thanks a lot, Linette. And welcome from my side as well. It's a pleasure to be here and to talk about these issues with you. So Linette was mentioning that we moved as an organization in terms of how we conduct supervision into a much more risk-focused. And identification of priorities is a key element of being able to be risk-focused. We have an internal process that allows us to identify what are the main risks that we need to tackle from a supervisory perspective and to set then what are our supervisory priorities in a way that then the work plan of the SSM of the mechanism, so the ECB part, but also the NCA colleagues that are working in the joint supervisory teams have a clear identification of the areas of priority and also the horizontal functions can devote their efforts to also looking into those priority areas of risk that are being identified. So how do we do it? We have an annual process that is setting the priorities for the following three years. You might ask, why do we have it annual if the priorities are for the next three years? But the idea is that every year we go back and see if the priorities that were set for a three years horizon are still adequate and still making sense given the evolution of the risk landscape. So we do it to be able to ensure that we keep flexible and being able to adjust to any new priorities that may come. In this risk identification and priority setting process, we try to ensure a good interaction between the macro perspective on what we see risks to financial stability with the micro perspective of the individual banks. And with these, we try to identify both through a top down and the bottom up process that includes no horizons scanning for the risks and these will allow us to identify the main areas of focus. We do it together with the national competent authorities and we do it in a way that ensures a risk-based analysis. We make these priorities transparent. So we published the priorities to also ensure that the banks are aware of where will be our supervisory attention but also to allow for accountability of our supervisory activity. Of course, the priorities are not the only things that we focus on during our supervisory processes and cycle. We have to conduct a number of exercises that come from the regulatory framework or that are followed up to previous priorities where we want to make sure that banks addressed the concerns that were identified in those analysis. But it's quite a significant part of our work that is being set up in this process. We thought it would be interesting to run you through what are our priorities for the three years ahead, so 2023 to 2025. And you will see if you look at the ones that were there last year, they did not change a lot in terms of broader priorities. So the first priority is really to ensure that the banks and the banking sector remains or even enhances its resilience and is prepared to face any macro-financial or geopolitical stocks. As you know, where we are coming from the COVID-19 crisis, then we had, as already mentioned, the invasion of Ukraine by Russia. And we had the market turmoil of March. So we have had a number of turbulence in the recent years and making sure that the banks are resilient to be able to face those situations as being one of our key priorities. So we continue to focus on credit risk management, namely with particular attention on most vulnerable sectors that were until recently the energy-intensive sectors, also now looking more into residential real estate, commercial real estate. But also we are looking with particular attention to the funding sources of banks and to their funding plans to ensure that these are diversified and we'll be able to handle the phasing out of the TALTRO, so the monetary policy normalization as well. As second priority, we have more structural challenges that the banking sector is facing. And they are mainly linked to digitalization, but also to governance and risk management. And we will see in the next slides when we also have a zoom in into the March term oil, why we consider these as areas of key attention. And within these, we are looking into the digital transformation strategies of banks. So how banks are dealing with the need to become more digital and what are the risks that may arise from these new way of conducting their business. We are looking into the operational resilience frameworks that also come as an important risk following the more digital business models of banks. And then on governance, a particular focus on how management bodies are functioning and steering the banks and how risk data aggregation and reporting is working. These were areas that in previous analysis and reviews were identified as areas of in need of improvement. The third priority, again, another structural challenge, which is how the banks will be able to step up their efforts in addressing climate change. We might talk a bit more about these, but we have conducted climate stress tests and also a thematic deep dive on climate. And those two supervisory exercises that were mainly learning exercises both from our side and to the banks revealed that there was still a long way to go, to be ready to face what could be material exposures to physical and transition risks. So this is another area of attention in our supervisory priorities. Now, moving into, zooming a bit into what happened in March 2023 and maybe only giving you a very light perspective of how we looked into these events and what we learned from them, these events, both in the US and in Switzerland, made us go back again to the basic foundations of banks and supervision of banks. The main elements that led to all the crisis were weaknesses in terms of risk management and governance from all these banks. We also identified that strong supervision and effective regulation are critical. From a lessons learned perspective, from the EU side, we see even more emphasis on the need to strengthen supervision in the direction that Lynette just presented, so more risk-based, intrusive, with a clear escalation ladder of measures to push banks to address weaknesses identified. The cases in the US raised particular questions in terms of interest rate risk and liquidity risk in the current monetary policy environment and also raised a very relevant point on why, after all the reforms that also Lynette just mentioned, to be able to prepare our banks and our supervision to deal with these kinds of risks, why have we still seen a crisis like in the US? And what I wanted to emphasize here is that the global banking rules in the EU apply to all banks independently of their size, but that's not the same on the other side of the Atlantic. So we continue to put emphasis on these because I think this is one of the main differences. Why do we think that in a way the euro area banks are not in the same situation? First of all, following our prioritization setting process that I just described, interest rate risk and liquidity risks were risks that were identified as risks that will be under stress with the normalization of the monetary policy environment and the raising of interest rates. So since 2021, they were identified clearly as priorities and we had particular supervisory actions there, but also the euro area banks do not exhibit the same features and vulnerabilities as banks like Silicon Valley Bank. Just to mention two things. We do not see the same size of unrealized losses in the balance sheet of our banks, but also the deposit base and customer base, it's much more diverse and not relying significantly on concentrated and annulured deposits. Still saying all of these, we see no room for complacency, so we are continuing to monitor closely, particularly these risks, as you have seen on the liquidity side. We are really looking into funding plans of banks, trying to understand what will be their sources of funding going forward, also taking into account that the cost of funding has already increased also due to the interest rate rise. The banks are still benefiting from this interest rate rise in terms of profitability, but we see, we start seeing some signals that the funding costs is increasing, so this will become more balanced. Finally, just mentioning that we just finalized also a review of the bank's preparedness to the phase out of the TLTRO, although it's written there the target long-term refinancing operations, looking at banks' exit strategies and then focusing our attention on the ones that are coming as outliers or showing more vulnerabilities. And moving to the last slide, just to share with you what are being our main takeaways and maybe even calling them lessons learned from this March term oil. We see that the main lessons come more for supervisors rather than on the regulation side. Of course, the scope of application of a regulation may be an issue in other jurisdictions, but not on our side. So we see that the lessons are more for us as supervisors and a lot in line with what we were already trying to implement and it was reinforced by the independent experts that Lynette mentioned that were also assessing our main supervisory and the review evaluation process, which are we need to continue having an intrusive supervision, identifying the findings, but then being able to escalate and take timely measures to ensure that the banks take timely remedial actions. We are also placing a lot of efforts in the areas of governance and risk management, as just mentioned. We continue to see, I think this is one of the parallelisms with the 2008 global financial crisis, is that the issues are coming again from weaknesses in governance and risk management. So I think these will be areas that we will always need to focus as supervisors, but we do see that what we need to strengthen is the way that we, and overall globally, we conduct supervision. Of course, we welcome the follow-up work that is being done at international level. The ECB participates actively in this work, both in terms of the work developed by the Basel Committee, but also by the Financial Stability Board, and we have identified just a few areas where this work is starting or developing on IRBB and liquidity risk to also take into account the experience of these last events, namely on how fast the deposits moved from the banks, so a completely different time horizon to be able to tackle the crisis, but also from the FSB side, questions are being asked on the effectiveness and even the adequacy of the resolution framework. We are convinced of its adequacy, so it's more on how do we ensure that it is operationally implementable and are there any kind of constraints to that, so further work on that will be done. And also in Europe, and you might be aware, the Commission proposed a review of our crisis framework, so that's an area where the ECB will actively participate in the discussions and is willing to contribute, so that we have an even better framework that allows us to address any potential crisis, because as much as we do, I think we will never be able to say that there won't be any other crisis and we need to be prepared, we need to do our best to try to avoid them, but then also be prepared to tackle them in a way that ensures financial stability and that the cover deposits are guaranteed and taxpayer money is not used to then address the situation. And with this, I thank you all for your attention and we are both happy to take any questions, comments from your side. Back to you, Connie. Thank you very much, thank you, Lynette, and thank you, Sofia, for that interesting overview over where we've come from nine years ago and where we're trying to go here. So now we're coming to you and your comments, questions that we hope that you have. So please raise your hand, your digital, your electronic hand. I can see that if you do that and I will call on you. And then, of course, unmute yourself and turn on your camera if you can and ask your question or make your comment. So I'm looking at the screen, I don't see anybody raising their hand yet, but hopefully you will have something ready. I know it was a lot of information in a fairly short period of time, but you may be familiar with some of it already, but maybe I can just start the conversation here and kick off with one question and if the colleagues already went there a little bit, but, of course, it's the ever-burning question that we get all the time and that everybody always asks and that each one of us has, in a way, but maybe I'll ask you, Lynette, what can the ECB do to ensure that there is not another banking crisis in Europe, I mean, at least not to the extent that we've seen after the aftermath of the great financial crisis? No, thanks a lot, Connie. I mean, I think I'm going to echo a lot of the points that we already made, I think, in the presentation, but I mean, first of all, I would say that as we showed in the presentation, the banks are in a better situation than they were, you know, 10 years ago in terms of, you know, capital, liquidity, asset quality, but also governance and risk management and, you know, they have been, as so few were saying, they have been very resilient, actually, in the face of a number of these shocks that we've seen in recent years and in recent months and that is, you know, thanks to a strong regulatory framework, which we have in place, but also thanks to the hard work that our supervisors have done to really push the banks, I mean, our supervisors on the ground are there every day, you know, really pushing the banks to move ahead, to take action and I think this is also, you know, speaks to the success that we have had in improving the resilience of the banks so far, but supervisors by nature are never complacent, I mean, and we are always looking, you know, what could be coming over the horizon? What could be the risks that are coming? And, you know, if you ask, what should we do as banking supervisors, I mean, I would echo, Sophia, we have a regulatory framework that seems to be serving us quite well, maybe some tweaks are needed, but what we need to do as banking supervisors is to keep applying that framework and applying the powers that it gives us with purpose and determination, and I think Sophia referred to the concept of intrusive supervision. And I think in the past, we've even been accused of being too intrusive with the banks, you know, pushing them on governance, risk management, board, effectiveness, but I think that is the hallmark of a good supervisor to be intrusive, you know, we, as supervisors, we need to be skeptical, we need to challenge the banks, we need to be proactive, and as Sophia said, also willing to act and empowered to act, so really taking timely and effective action and we have this concept of, you know, the escalation ladder to really sort of build and make sure very clearly that we have a plan for how to deal with weaknesses that we see. And, you know, even if we don't have banks like Silicon Valley Bank, as Sophia already mentioned, and this was also the US authorities did some soul searching as a result of what happened in March and actually some really critical self-reflection and one of their conclusions also was that you need very strong supervision, you need to follow up, you need to be proactive as a supervisor, and this is an area where they felt themselves, they had perhaps not gone far enough, so I think that is also pushing us in that same direction. And Sophia mentioned the fact that the European regulatory framework is applied to all banks, so whether small or large, and I think that's an important point as well because there are also sometimes calls for more proportionality in the regulatory framework, we've seen this also in the past, and while I think, you know, for smaller banks you can certainly or we can certainly see how we can reduce some of the burdens and I think there have been some work done on reporting burdens and things like that, but we shouldn't soften supervisory standards and I think that, sorry, regulatory standards, prudential standards, capital requirements, liquidity, et cetera, and I think that's also something that the US colleagues have learned a lesson there. But in the end, and I think this is an important point because as supervisors we can do so much, but in the end, it really is the responsibility of the banks to take ownership of their risks, identifying, managing their risks, having the governance and the risk culture that they need to have, and what we've seen at the heart of every crisis, every failure I think of a bank is underlying, there may be different triggers, but underlying the crisis is usually a problem with governance or risk management, so I think this is something we should also be clear about the banks need to take action. Thank you very much, Lynette. So I see a hand up here, Lukas Krebel, can you please unmute yourself and yes, hello, please, go ahead. Hi, hi, thanks very much for this presentation. I'm Lukas Krebel from the New Economics Foundation. So I have a question. So it's very good to see that one of the three supervisor priorities is obviously addressing the climate change. So I have a related question on that topic. So obviously given now what we are witnessing right now and the impacts of climate change, the record hit waves and so on, it looks like the risks of climate change is being materialized even faster than was anticipated by scientists, but even if it was not so like we know they are very grave. So how do you consider like the systemic character of climate related risk that has impact on the whole economy more broadly and then obviously on the financial system in your supervisory approach to how we oversee the banks in the eurozone, if you could tell me a bit more about that, it would be great. Thank you. Thank you very much. Would you like to take us with you? Yeah. Thanks a lot for your question. As you might have seen from the presentation, climate is one of our priorities in terms of how do we ensure that banks are prepared to tackle the transition risks and how they are already now taking climate risk as an element that may impact them on a number of risk areas. We have done, as I mentioned as well, climate stress test already in 2022 and we did also a thematic review to look into how banks were able to have first relevant data and how were they then able to manage the risks that come from climate. And on both these exercises, so the stress test was the first time we did an exercise. It was really a learning exercise, both from the bank side and from the supervisors as well. But we really identified that there were deficiencies still. At that time, we published what would be our expectations. So what would be the expectations we have as supervisors that banks evolve and need to tackle. And we followed up then with each bank giving them a timeline and what would be the expectations that we would have them to deliver until end of 2024 with some milestones in 2023 that we are now looking into and assessing but with a final timeline of 2024. And they were informed of what would be the steps that they would need to take to incorporate climate-related and environmental risks within their business strategy, their governance, their risk management framework, their risk data aggregation, et cetera. And we would expect them to fully integrate these in their own internal processes, in their ICAPT, in their stress testing frameworks. So to really be part of their regular way of working also with particular focus on credit risk, how do they look at the impact in terms of credit risk in residential real estate, in commercial real estate, loans, et cetera. And the ECB will then assess these shortcomings. We have already done it in the 2022 steps of the supervisory review and evaluation process that we do every year. And we have already taken some qualitative measures there. And now, with having given more time to the banks, we are even considering taking some quantitative measures on the ones that are showing more weaknesses. And if necessarily we will also take enforcement actions to make sure that the banks are going in the right direction. I want to be fair, we see already some progress, but we are still not where we would like the banks to be. So this continues to be an area of particular attention and one of our supervisory priorities for the cycle of 23-25. I don't know, Lynette, if you want to answer. If I may, only one point I would add is that, and you alluded to this, Sophia, that this is a learning experience for us. And I think one of the things which we hear sometimes from the banks about the difficulties they face, but we also learn from some of the banks about how they overcome some of those difficulties. And it's been important to publish some good practices and to share a little bit how some of the banks are dealing with some of the challenges around data and things like that. And I think that's something that we should continue to share and disseminate as much as possible. Thanks. Thank you very much. Did you have another question, Lukas, or is it, I hope you answered? So let's see. Thank you. Maybe if we can have a follow-up? If... Sure, please. Yeah, for those answers. Yeah, so a follow-up question is, so how do you then also consider, given that the banks' activities make some contribution to climate change themselves, like the type of activities they find us and they do not find us, having interviewed the European climate goals and the view for transition through that zero and your climate, a lot of themselves committed to Paris Agreement. So how are you considering those, that the banks to which your expectations, to what extent they are aligned with those goals, which if they do align with them, obviously that will have some impact on reducing systemic risk in the longer term by having less financing of political activities. So to what extent you are considering this interplay between supervision and what the banks do and actual impacts on climate and not just pure risks towards banks? Thank you. Well, I would like to stress that as supervisors and as potential supervisors, we are mainly looking into the risks, no? The risks, we look at climate and environmental risks from a risk perspective, right? And we look at it through our traditional risks, so what will be the impact in terms of credit risk, but also of course in terms of strategy, in terms of business model sustainability, if you want to call it like that. So we do have this more broader perspective, but we always come through the angle of the risks, of potential for the soundness and safety of the banks. And this is always the perspective that we take when we look into climate and environmental risks. And if you look at the way that we are acting, what we are pushing the banks to is first that they are able to identify the risks and that they are able to then monitor and manage those risks. So I think this needs to be also clear. There are other institutions that are taking more political view, et cetera. From our side, we are really looking into it from a potential perspective. Thank you very much. Let's see, we have another question here from Alexander Simic. Alexander, please unmute yourself, turn your camera on if you can. Yes, thank you for the presentation. I'm Alexander Simic from the Sustainable Finance Lab in the Netherlands. I have two questions. So one is the follow-up to the previous one. You mentioned that enforcement action might be taken against banks that are not going in the right direction. So I'm wondering if you could be a bit more concrete as to what this action is. And the second question is, we talked about climate-related financial risks, but I'm curious as to how DCB looks at nature-related financial risks. Thank you. I could not hear well the last part. Can you just repeat the last part of your second question? I think we catch that. Sorry, of course. Yes, so I'm curious about nature-related financial risks. So this is a bit of a broader term than only climate and these two groups of risks interact. So I'm curious as to how you see this group of risks. Thank you. Thanks a lot. So on the first question, what I would stress is that when looking into risks, we look at all our supervisory tools to be able to push banks to act and to remediate weaknesses that we identify in our supervisory work. So we look at the full toolkit where, of course, enforcement and sanctions are one of the tools that we have available to act. So when mentioning that, what I wanted to say is that we see climate and environmental risks or a bit also answering now already your second question is not only climate, we look at anything that could be materially impacting the business of the banks. And we then look at our toolkit and see and identify what are the best supervisory measures to achieve the supervisory objectives that we have. And those could be depending on where we are. Also in our escalation ladder, as Lynette already alluded to. So we do have an approach that starts with supervisory dialogue with the bank when we identify issues, concerns, vulnerabilities. We might then follow with recommendations or very clear sharing of expectations so the banks know what they need to do, what we expect them to do. And then we start an escalation ladder if we see that there are no actions or adequate actions being taken by the banks. And these could be of very different natures. We could have qualitative measures, quantitative measures that could be pillar two requirements or even enforcement and sanctions. So the adequacy of the measure, of the supervisory measure to be adopted depends on the case-by-case assessment of the situation, but the full toolkit is available and for the impact of climate risk and the way the banks manage these risks. The full supervisory toolkit is available for us to then act if necessary. And then, again, just to stress, we look at risks. Risks that are material and we see climate and environmental risks more broadly as being potentially material, so the banks need to look into those and to any other that could be material depending on the business model of each of the bank. And this will be an assessment that needs to be conducted by our joint supervisory teams but with the support both from the horizontal off-site supervision and the horizontal on-site supervision as well. Thank you very much. Do you have a follow-up by any chance, Alexander, or is there any questions? No, I'm happy with the response. Thank you very much. I don't see any other questions, any other comments, questions from you. I don't see anything there. I don't know if you wanted to add anything because if there are no more burning questions here, I mean, we would come to a conclusion. I mean, we have a few minutes left if there's anybody who still has a last-minute question. But if not, then maybe we'll conclude here because, oh, sorry. Now here we have a last-minute question. So Clarice Murphy, please. Yes, hi. Thank you for giving me some time for the question. So I'm Clarice Murphy from Worklave Finance and I just had a question about stress tests. And I mean, as you were saying, like most of the work you've been doing has been quite, like, is the learning curve your kind of learning along the way of what works and what doesn't quite work? And there's been kind of some studies lately on how the climate scenarios are being considered for the stress test or usually quite poor, or at least don't really reflect the reality of climate change and the real consequences that it will have. So I was thinking, how do you take those into account and how are you kind of reviewing your stress tests and kind of this approach to this? Thank you. Thanks a lot, Clarice, for the question. I think it's quite an important question. The adequacy of the scenarios in a stress test are critical. So just to clarify, I think it's clear, but when I mentioned the climate risk stress test, this is a very specific one. So we conduct also a general stress test every two years together with the European Banking Authority, with the EBA. They have a sample of banks. We then include also the remaining SSM banks. And these stress tests, it's much broader than only climate. And this year stress test, we will be publishing the results later this month, 28th of July. And the scenarios were quite severe from an overall perspective. But I think you were asking more in terms of the climate, the specific climate stress test. So besides these overall, including all the sector stress test, we do have some more targeted stress tests. We conducted the climate one in 2022. The idea is to be continuing doing those also to be able to see how the situation is developing. And of course, the scenarios will need to be adapted, as also the situation is evolving. The scenarios are usually taking into account analysis from organizations that are also looking particularly into how climate is evolving. So I would expect, and the stress test is supposed to have quite severe scenarios, to really test the ability of the banks to undergo these crisis events, these impactful events, but also to identify where could be weaknesses and try to address them at an early stage. So the stress test gives us a lot of information that also allows us then to tackle the situations, both from do we need to address anything in terms of capital, or should it be through qualitative measures? Again, we have, again, the overall toolkit open. So I would expect that the scenarios are still plausible, but quite severe scenarios for any stress test that is conducted from our side. All right. Thank you very much. I hope I answered your question, Clarice. If now I don't see any more hands, and we have come to the end of our hour here at the end of the seminar, thank you very much for joining. I just a couple of points. We have a feedback survey, which the colleagues are calling up right now, and we would really appreciate if you would fill that out so we can use your comments to improve and to keep doing these seminars and to build that into our next seminar series. So while you fill out this very quick survey, I can thank our speakers, Lynette and Sophia, for the availability to give us their insights. And I thank you very much for participating and asking your questions. So we cannot, of course, predict. I mean, you heard here, probably not first, that we cannot predict the next shock. We cannot predict the next banking crisis. But of course, we work very diligently to avoid any of that or to mitigate it. That's why we're here. And we, of course, keep improving, keep adjusting, and hopefully helping the banks become and remain resilient and become more resilient. So with that, I thank you all very much and have a good evening and the rest of the day. Thank you, bye.