Nikolas Speer takes a look back at his first 100 days as a banking supervisor. His priorities as BaFin’s Chief Executive Director of Banking Supervision include credit risks, IT security, governance and reducing complexity. Internally, he advocates open and efficient collaboration across hierarchies and sectors.

From banker to banking supervisor – how have the first 100 days been in your new role?

The move from being a supervised banker to being a supervisor was a big step for me, but it was one that I took consciously and eagerly. This new role is incredibly exciting and varied. The best part has been meeting so many new colleagues who are not only highly skilled, but also show exceptional dedication. It’s a great pleasure to work with such a strong team.

You worked in risk management for many years. What continues to fascinate you about this topic?

First of all, it's about uncertainty, which gives rise to risks on the one hand and opportunities on the other. Risk management is essentially about consciously dealing with this uncertainty: the possibility that things may not work out as they should. We all constantly act as risk managers in our own lives, and at the end of the day we supervisors also assess risks and try to limit them. I find that really exciting.

... and what does that mean with regard to banks?

The core business of banks is to take calculated risks in order to generate returns. I’ve always been very interested in the banking business because it gives you a comprehensive overview of the economy as a whole and because risks are a factor everywhere. Almost every decision in a bank is associated with risk, be it in the lending business, in the management of liquidity or in the way firewalls are set up. Ultimately, banking supervision is also risk management. Only it’s not for a single institution, but for all of them – and thus for the entire financial system.

I am convinced that implementing good risk management can make a huge difference: for institutions, for the stability of the system and for people’s confidence in financial markets.

What do you intend to prioritise in your supervisory work?

One priority – which comes as no surprise – is clearly credit risk. It has always been a significant factor in the typical bank balance sheet in Germany and will probably remain so for the foreseeable future.

For several years now, we’ve been focussing more and more on non-financial risks – above all cyber risks. That’s one area where the situation is especially dynamic. Even just measuring these risks is a challenge. Capital rules alone are not the solution. We need to get banks to anticipate how and where hazards can arise. If these risks materialise, they could cause considerable damage to the financial system.

Do you plan on setting any additional priorities for supervisory work?

I consider BaFin’s strategic objective of reducing complexity and promoting proportionality and risk orientation to be particularly important. We want to play an active role in simplifying regulation both in Germany and internationally. I believe that regulation that is as simple and clear as possible is ultimately more effective. At the same time, consistent proportionality is extremely important, especially here in Germany with around 1,300 institutions. Smaller institutions with manageable risks do not need to be subject to the stringent, highly detailed requirements that we place on large banks. I see these two pillars – simplicity and proportionality – as an expression of risk-orientated regulation and supervision.

How do you intend to promote simplicity and proportionality in concrete terms?

We’ve put together a package of measures that is specifically designed to achieve this, and we’re already implementing it. To name just two examples: we’re currently revising the MaRisk, our Minimum Requirements for Risk Management. Our main goal is to make them significantly shorter and more principles-based. And we want to simplify stress testing for small and medium-sized banks.

You mentioned credit risks, cyber risks, more simplicity and proportionality. What about governance?

That’s a perennial issue. We see very clearly that poor governance often causes massive problems. When institutions encounter difficulties, whether in their loan books or elsewhere, the root cause often lies in how the institution is managed and controlled by its supervisory board or administrative board. We are convinced that good governance is essential for effective risk management.

Banking supervision only works when there’s a dialogue with the supervised institutions. What are your priorities here?

Figures, reports and organisational charts are important, but they never tell the whole story. Personal interaction is crucial. When I spend an hour talking to the management board of an institution, I quickly get a feel for how well the institution is really positioned and where we as supervisors need to focus our efforts. This takes more than just checklists. It requires discussion on equal footing. That is precisely why having an open and critical but also constructive dialogue with institutions is so important to me.

Looking ahead to the coming months, what issues do you intend to address in the medium term to make supervisory work even more effective?

We have a huge trove of data on all supervised institutions and the financial system as a whole. We want to leverage this knowledge more systematically in our work and achieve real “data-based supervision”. This also means we are open to making sensible and responsible use of AI.

And of course we want to continue developing our organisation. Expertise alone is not enough – we also need to invest in excellent leadership and talent development.

Thank you for talking to us, Mr Speer.