The Supervisory Board of the European Central Bank has turned its attention to the digital strategies of euro area banks, concerned they could be a growing source of problems for the banks. In a speech earlier this month, the chair of the Supervisory Board of the ECB, Andrea Enria, said concerns about digital transformation strategies were raised during reviews of its supervisory activities in the period leading up to the failure of Credit Suisse. Enria said: “We are now sharpening our supervisory scrutiny of digital strategies. A strong digital strategy has proven key to restoring profitability at many euro area banks.  “But when digital transformation is driven predominantly by a commercial perspective and overseen via a weak governance framework, with little attention to internal controls and risk management, it could prove a real problem.” Enria did not spell out what the problem might be, but there has been plenty of commentary about the way 24/7 digital banking allowed for the loss of confidence in Silicon Valley Bank to turn into a run on the bank very quickly. Enria is in the camp arguing that the lesson from the events of March this year is that the system needs stronger supervision, not more regulation. “The key takeaways for authorities relate to the ability of supervisors to escalate issues and ensure prompt remediation by banks,” he said. “We should abandon the ambition of designing ever-more precise regulations that accurately measure all risks under any circumstances, covering even the most extreme business models and risk configurations. “That approach only results in excessive complexity, with burdensome procedures for supervisors and excessive rewards for the few institutions that have the wherewithal to game the system. “Instead, we should focus our efforts on empowering supervisory teams, within a strong accountability framework.” He said the area that supervisors should be focusing on is ensuring banks have sound internal governance and risk management. “Failures in this area are the common theme underpinning recent events in the United States and Switzerland. “The ECB has at times been criticised for being overly intrusive and interfering in the area of internal governance. But when poor governance or an unsuitable business model puts the viability of a bank in jeopardy, supervisors need to be bold and drive change within a well-defined timeframe.”