This is a four-inch refractor and this is a four-inch refractor and this is also a four-inch refractor. So why are they priced so differently? Well on paper these all sound great for astrophotography. We really need additional tests under the stars in order to make an informed decision. So that's my plan for this video. I'm going to trial these telescopes out one night, compare them when it comes to features, build quality, and of course an image comparison. The image comparison means we're going to shoot all of these telescopes on the same night with the same camera, the same mount with the object high in the sky, and you may have seen some previous telescope shootouts on my channel. Well I am always trying to step up my game when it comes to testing telescopes. So for the first time in this video I'll be testing these four telescopes with a small pixel but full-frame color astronomy camera the ASI 6200MC which is a very demanding imaging test for a telescope and it should clearly show us some differences. Hi my name is Nico and this channel is all about astrophotography and today I'm reviewing four inch refractor telescopes. All four of these telescopes behind me actually can be used visually with an eyepiece but I didn't test them that way because it's just not my personal expertise. There are other telescope reviewers like Ed Ting here on YouTube who I'd recommend you check out for that kind of thing. My reviews are only going to cover telescopes from a photographer's point of view. So I'm always just going to put a camera on the back of them. I did not personally purchase any of these telescopes they were all requested by me for the purpose of this review video so let me quickly disclose who lent me each telescope. I do these disclosures for all of my reviews towards the beginning of each video and it is part of my published review policy. The Founder Optics FOT106 was lent to me directly by Founder Optics which is an awesome smaller company that specializes in refractors. I previously reviewed their 86 millimeter refractor so if you're looking for that one you can find that review. The Skywatcher Esprit 100ED was lent to me by All-Star Telescope which is a Canadian telescope store but they now do have a US distribution center which is great for me in the US because it makes shipping much easier and also even now just browsing their site it will show you the prices in US dollars if you're in the US or Canadian dollars if you're in Canada so they've made some nice improvements and thank you very much to All-Star Telescope America for the loan of this Esprit 100. The Ascar 103 APO and the various flatteners and reducers was lent to me directly by Ascar and I really value my relationship with Ascar. They're really great about loaning me their new telescopes for review so I've reviewed several of them on the channel over the past few years and last but not least a relatively new relationship is with ZWO who lent me both the ZWO FF107 APO telescope and the ASI 6200MC camera that I'm using to test all these telescopes so a huge thank you to ZWO and with all of these borrowed items the companies have no say in what I share in these reviews the agreement is that I get to try out the telescopes I say whatever I want in this video and then I send them back or occasionally I'll buy the telescope directly after the review is published but that's just if I personally want the telescope for something. Okay that's it for the disclosures for this one something I often forget to emphasize with these telescope reviews that is really important if you're a beginner is these telescopes can't be used for deep sky astrophotography without the proper mount and for a telescope of this size a 4 inch or 100 millimeter refractor you can expect the tracking mount to cost just as much if not more than the telescope itself so you really need to think of this telescope as one part of a system and each part of that system has to work together to get good results for deep sky astrophotography for 4 inch refractors I'd recommend the Skywatch or EQ6R that I'm going to be using for the testing in this video or a mount with a similar weight capacity like an ioptron CEM-40 or if you want a harmonic drive mount a ZWO AM5 should work for these two okay next let's look at the physical characteristics of each refractor and we're going to see what's included all of their weight send dimensions all the features and build quality okay this is the Ascar 103 APO this is a new telescope on the market it is a triplet design with one ED glass element in that triplet none of the flatners or reducers are included but they're all available at a pretty affordable prices so I have here the 1x flatner installed so let's just measure the length with the dew shield out but the focus are in and at that length to the back of the flatner we have 77 millimeters or about 30 and a half inches with the front cap off with the 1x field flatner installed the Ascar 103 APO weighs 5,730 grams or 12 pounds 10 ounces okay and then here is the case that it comes with this of course was packaged in more padding in a double cardboard box you can see it's like a soft side on the outside with a nice diagram of the telescope and then on the inside you have this nice thick custom cut high density foam that fits the telescope really well and this is you know you need the focuser and the dew shield to close down and the visual back on to make it fit just like this with the extension in there as well now if you've seen the review of the Ascar V that included the different reducers and extenders and stuff so there were cutouts for those in the case that's not the case with the 103 APO since all of those are optional accessories so they don't put any kind of cutouts for those with this case it comes with this vixen style dovetail plate that's plenty long and it has a bunch of holes in it the rings are fine they're not super thick or anything but they they work and you guys you can see all the colors are sort of this orange with black and white and some red accents as well and then on top here of the rings it does come with this nice place to put your guide scope or finder scope but also has two Cinta style finder shoes back here let's rack out the focuser so I don't know if you can hear that I'll just be quiet here for a second but that that sound is sort of the sign of his like it's not silky smooth in terms of being a rack and pinion focuser it sounds like there's like a little bit of you know friction there or something but it works it's just a little bit doesn't feel like a premium premium focuser in terms of travel on the the focuser it comes out to 100 millimeters so nice and long it is indexed both there and for rotation I had no issue with the manual rotator it feels really good has just sort of the right amount of friction on the manual rotator so that it feels like it's going to stay solid and not like rotate too fast but it's also not hard to rotate in terms of build quality I'll just mention a couple things that were a little concerning okay so the first is and I can just I've left this loose this of course focusing knob just sort of came right off on me as I was testing it now there's a set screw in there to hold it on so all I'd have to do is just get the right kind of allen wrench and and put that back on to the knob here I just thought it was funny that it just came off might have just been a weird coincidence and then the other thing I noticed is with this field flattener I don't know if you can see this but I'll try to show it to the camera here it's like this sort of like delamination so I think this should all be matte black but instead we have some parts where the matte black coating uh isn't matte anymore it's sort of like glossy so I'm not sure what happened there but I'm not I haven't seen that on any of my other ascar stuff so I thought I'd I'd mentioned that okay and then in terms of this being sort of like a system telescope it is very convenient so if you want to move from the 1x flattener to the 0.8x reducer flattener all you do is just unscrew it and then the 8x 0.8x reducer has the same threads it goes in like that and the they both have 55 millimeter back focus with of course 48 millimeter uh threads on the back there so it's going to be really easy to put any kind of camera on whether you're using the flattener or the 8x reducer 0.8x reducer now if you want to use this reducer the 0.6x reducer which brings this scope down to f4 you do need to remove a piece of the telescope here and ascar made it look like in their instructional video that this is going to be really easy to take off I found on mine it was really sort of stuck on there and so I did need to use a strap wrench to get this piece off in order to shorten up the telescope so I could use this 0.6x reducer so just something to keep in mind I felt like it was like I couldn't do it with just my hand alone even following their instructions but with a strap wrench it did come off pretty easily with the strap wrench and then I was able to use this reducer as well next we have the founder optics FOT106 this is a ED APO triplet design with a dedicated field flattener that comes with it and from I've attached the field flattener here as you can see here and from the extended dew shield to the back of the field flattener it is 69 millimeters or about 27 and a half inches long front cap off but the field flattener installed the founder optics 106 weighs 6,724 grams or 14 pounds 13 ounces here's the case it's a nice hard-sided case with the style of latch has a handle here on the inside we have foam and some different accessories some of these I didn't put on but they would be nice for instance it comes with a nice top handle if you want to install that it has m42 or m48 adapters for the field flattener this is the original adapter for you know using eyepieces or the field flattener it's a sort of a roto locking kind of system I took this off in exchange for the threaded adapter but it does come with it all the other stuff was packaged with the telescope but you can't fit it back in once you've put it into imaging mode like this you would need to sort of disassemble the telescope take off the dovetail and compress the the rings so to fit it back in the case here so we have some nice substantial rings here with attachment holes on the top and a vixen dovetail it's a little bit short but I think you know long enough that it should work well the focuser seems really nice and it's really smooth it's like a super smooth experience with the focuser no sort of scratchiness there at all it's a rack and pinion it goes out to 95 millimeters of travel and it does have a manual rotator back here that is also nice and smooth no indexed marks for rotation that's that is one thing that's missing the standard way to connect the field flattener is with this sort of roto lock kind of thing that they they include but you can buy this accessory which I do recommend for imaging which is a threaded adapter so it threads into the focuser threads into the field flattener and I think that's going to give you a better experience with less tilt this is a standard two inch style field flattener and they do include adapters for both 42 millimeter and 48 millimeter back here it has the standard 55 millimeter back focus and the entire focuser assembly is rotatable there's a lock right here for that so now it's locked but if I unlock that you can see I can rotate the focuser and the nice thing with that is if you need to get these um focuser knobs you know out of the way or you want to put them on top like this and here I can show the really innovative lock system it has it's just a really nice feeling little big knurled knob there my one issue with it and it's just it's more just like a learning thing is if you if you get to a certain focus position if you just do this just finger tight it's going to hold but if you go a little bit further I don't know if you can see this see it just moved a little bit so if I really lock this down as I'm sort of just accustomed to doing then it actually changes the focus position so you either would have to then you know hold the focus position while you're locking it or just get accustomed to don't lock it down so hard that you actually move the focus position when locking the focuser I gotta say that the both the focuser rotation and this camera rotation are super smooth they just feel really good nothing nothing sort of rattly about them they lock down really well so everything about this telescope in terms of build quality I gotta say is really a high-end experience here's the ZWO FF107 APO the FF means full frame the APO means it's an APO chromatic refractor this is an astrograph meaning the field flatener is built into the design and it is 76 millimeters or 30 inches long with the dew shield out but the focuser in with the front cap off the ZWO FF107 APO weighs 6,966 grams or 15 pounds six ounces here's the case that it comes with you can see it's a hard style case with latches on the front and a handle but actually handle both here and here and this is what it looks like packed you can fit the whole telescope in without taking off the rings or the dovetail you do have to put the visual back on and back the focuser in and all that it has slots here for the imaging adapters the foam feels a little cheap it's like sort of like a medium density foam that sort of bent already but the cutouts are nice it's a well thought out and I do like that you can keep the telescope roughly assembled with the rings and everything and still pack it away in this case you can see it comes with some nice rings here and a top handle it comes with a vixen style dovetail that's nice and long all of this is you know red accents of course with ZWO and the focuser looks substantial it's a rack and pinion design it is indexed both in terms of travel but also rotation here and it is about it goes out to about 86 millimeters of travel there in terms of locking it just has the typical little uh little thumb screw down here for locking the focus and it just it just moves it just a hair so you one thing you can do when locking the focus if you're focusing manually is just to once you find focus just hold on to it and then lock it and that should work pretty well it offers full 360 degree rotation back here this is the style of manual rotator I like the most now any kind of rotator can introduce tilt into the system this one included I haven't seen it on many of these sharp star style scopes but it might happen this is for locking the rotation of course and then you have the little indexed mark right there so what I really like about this is if my software tells me okay rotate 30 degrees counter clockwise I can say okay I'm at 10 so I'll go to 340 and then lock it down and it works really well that way it has a normal synthesized finder shoe bracket right here and screws for another one if you need and that's about it every ever all the mechanics seem really nice uh the build quality seems good so not much to complain about very standard kind of imaging telescope here there's a 0.7x reducer available for the ZWO FF107 APO I have it right here the way that it installs is you take off all of these imaging adapters here and it goes into the focuser like this and then it includes these adapters so you have 55 millimeters of back focus off the final threaded adapter here which is a 48 millimeter diameter okay here's the sky watcher spree 100 ED this is a super APO triplet meaning that it has two of the three glass elements in the triplet two are this FPL 53 super extra low dispersion glass that's very desirable for imagers especially but also visual too and then it comes with this dedicated field flattener which also uses ED glass which I've attached back here now if we measure from the front to the back of the field flattener with the focuser in it measures about 64 centimeters or 25 inches with the front cap off but the 1x field flattener installed the sky watcher spree 100 weighs 7282 grams or 16 pounds one ounce okay here's the very interesting case that the spree 100 came in it's a sort of oversized hard sided case with these latches on the front on the inside there's all of these racquetballs there's little inserts for them but they do come out if you want to play around with them and this is just to really protect the the telescope here that's where they all are located is in the telescope part of the the box you do have to completely take apart the telescope to fit it back into the box right because even with the rings and the dovetail plate on it's not going to fit back in so you have to completely take those off there are inserts for all of the different stuff that it comes with but you basically have to do a complete disassembly to fit it back in here oh and I while we're in here I should just point out that this telescope comes with a bunch of extras so it comes with a really nice little diagonal here for viewing it comes with a 48 millimeter t-ring for canon it comes with a visual back of course I've already mentioned it comes with the field flattener it also comes with a little sky watcher right angle corrected finder so pretty cool little accessories especially if you're planning to ever use this scope visually it comes with this short loz mandy style dovetail plate I was a little bit skeptical of it but once I put my camera and stuff back here everything balanced very well with this telescope it has very nice beefy rings here and the focuser seems incredibly well made it's a three three point four inch rack and pinion focuser very smooth going out it does have indexing millimeter indexing here and so we can see it's a 90 millimeter travel on the focuser there this is a captain's wheel it's a little bit sticky but if you loosen that up and the focuser is all the way racked out like I just did here you can actually move the entire the rotation of the entire focuser now this is not the primary way to do camera rotation with this this is more if you for some reason wanted for clearance reasons wanted the focuser in this position so that the knobs are up here you can do that and then once you've done that you just lock this captain wheel back down and that's now locked in this position this is the focuser lock and this is one of the best focuser lock designs I have ever used it's so easy to find focus right it holds well and then I just bring this little lever down to lock focus and it does not move the focus position so right so if I get fine focus one of the very annoying things is with a lot of these focus lock designs you start twisting them and it actually slightly moves your focus position this lock is perfect so if you are manually focusing the spree 100 it's a very good focuser for that now this is where we get camera rotation and I'm not sure about this design if I really like it so much because it seems a little bit hard to use in the night but it's two rings so you loosen the back ring that lets you rotate the camera however you want and then you tighten this front ring and that's the locking ring and now well not quite there we go so now rotation is locked so to get it back you know I'd have to you have to sort of do you have to sort of use both hands and go in opposite directions and then you can loosen it up again rotate the camera and then lock it back down the the two things I don't like about this is it seems sort of hard once you get it really locked to unlock it and then also there's no indexing for rotation okay here's the field flattener it seems to work quite well it comes with the telescope and I like that it's fairly customizable it actually has 63 millimeter back focus from here which is these larger 68 millimeter threads but then it also comes of course with a little adapter to bring you down to 48 millimeter threads and this adapter is eight millimeters in thickness so from from here the 48 millimeter threads then you have the standard 55 millimeter back focus and that's how I used it with the adapter but if you needed that extra eight millimeters of space you could take this off and have an extra eight millimeters there to play around with so that's that's very nice okay and now last but not least we are on to the imaging test here are the tech details for this imaging session I won't spend too much time with these because they're pretty much my standard testing regimen in terms of shooting with no moon out in the middle of the night when the object is high in the sky using my sky watch or eq 6r mount I always do five by five minutes for this kind of telescope testing the the reason I don't do longer integrations is so that you know I can capture the object quickly enough that it's in this basically the same part of the sky and we're not having as much atmosphere differences the only thing that really changed this time which I mentioned at the beginning is instead of the 2600 mc which I used for the past two I think I'm now using the 6200 mc on loan from zwo which is pretty cool because it's a full frame camera but with small pixels so this should be the ultimate in showing us sort of uh the differences when we're talking about telescope distortion it's it's also you know something that's that most people I wouldn't really advise but it's just if you're interested in this kind of thing telescope testing I think this is the ultimate kind of camera to test with right now okay the first thing we're going to look at here is a single frame from each telescope I tested at native focal length and the main thing I'm looking at here in a single frame is just how well the telescope illuminates a full frame sensor and so here's the ascar 103 you can just see a tiny bit of darkening in the very far corners there's the founder optics 106 a little bit more darkening in the corners there's the zwo 107 about the same as the ascar and there's the esprit 100 which is pretty good too um just a little bit in the corners but a very gentle roll-off more so than the others I think okay and then this is now with flats and stacked and you can see that once you add flats uh to or once you take flats and calibrate with them it really takes out any of that vignetting and you know some people are worried about signal to noise ratio in the corners I've never really seen much of an issue with that so if a telescope doesn't fully illuminate into the the corners like that I always take flats so it really doesn't matter much to me you'll see the spree results are not rotated quite the same as the rest I just had a little bit of trouble with the way that the spree rotation system works so I didn't really try uh to get it rotated the same uh well with these it was easy to to rotate the camera the same way the next thing we're going to look at is the stars in the corners and the center and I make I make these uh reports with a script here in pics insight under image analysis it's called aberration inspector and we'll first look at the stars in the corners and the center with the full frame sensor and so here's the ascar 103 this is again with the 1x flattener native focal length and it looks pretty good I mean there's uh one bright star out here that you can see looks a little distorted it has a line through it but other than that I think this looks pretty decent now we can compare here to the founder optics f ot 106 um maybe a little bit more distortion you get a little bit of like a cross star even with medium-sized stars and up here I'm not sure if this is uh tilt or just distortion but we are seeing a little bit of elongation in different places okay then here is the zwo 107 and you can see it has some like weird reflection artifacts going on uh if we look back at the full stack you can see there's a couple up here on this corner and one pretty noticeable one down here and those did show up in all of my frames I don't know if it was something just with my telescope or or what but uh yeah I did notice these weird reflection artifacts on full frame with the zwo uh I'd also say that the stars look a little bit soft in the corners compared to these first two and then here's the spree 100 uh I'd say it's it's a very sharp telescope the far corners look pretty distorted now they do look sort of all radiating in which would suggest that the back focus wasn't correct but I'm positive I did it according to the manual uh so but it looks like I need more back focus based on the stars all radiating out like that however I'm not sure how good the stars would be in the corner with full frame on this spree anyways because if we look at them a little bit closer you can see in addition to being elongated they're also crossed right they have the little uh cross across each star so even if these were a little bit less elongated I'm still not sure they would be really like acceptable for a discerning imager and then next we're gonna I what I did was I cropped down the full frame to the size of a psc and I think this is going to be illustrative because a lot of people have maybe like a 2600 and the si 2600 and this will show you what that would approximately look like so here's the ascar 103 in the corners in the center it looks good it looks a little boring like the stars aren't very colorful that might just be because it's on the slower side at f 6.8 so there wasn't enough time for much color to add up here is the founder optics 106 we definitely have a little bit more distortion than the ascar scope here the colors to me look a little bit better though here's the zwo 107 that looks pretty good and here's the spree 100 and there are you know some plate scale differences here because for instance the zwo we were at 749 millimeter focal length and the spree we're at 550 so it's a pretty big difference so well this may look sharper it's it's really just because there's more stars in each box right so then they're more zoomed out so then they end up looking sharper than some of the other results what i'm looking at here is a crop in the center and what i did was i stretched each one just with a normal kind of arc sign stretch and then i saturated each one quite a bit because i wanted to see color differences and see what we could see in terms of color differences and i thought it was pretty interesting i thought that the the founder optics and the spree had richer colors while the ascar and the zwo had slightly more muted colors now with enough integration and processing i'm sure that could be overcome but it's just something i noted noticed is that the founder optics and the spree seem to have a little bit more natural blue come through well it seemed a little bit more cut off in these two especially in the ascar 103 like it just feels like not enough blue is is coming through on that glass okay so keep in mind these are really saturated for the amount of integration here so you are seeing a little bit of like color fringing on the spree in the founder optics but i don't think that's anything serious in terms of chromatic aberration i think that's just because i really saturated these to try to see the color differences um and with these two we're just not uh seeing as much of that color because they're slower scopes right other than that very similar in terms of critical sharpness here i don't really see a big uh difference maybe you'll see something more than i am i would say that for the fact that this the spree is at 550 millimeter focal length it looks just as detailed as these other ones which means it's probably a pretty uh sharp telescope that's about the only thing i can really see in terms of differences here now if you're only interested in you know these four telescopes reviewed at their native focal lengths you could stop watching here i'm going to go on and show some results that i got with various reducers that were sent to me for the ascar and the zwo scope okay here is the ascar 103 with the 0.6 reducer so this brings it down to f4 and you can see there's a quite a bit of light fall off um but the zwo ff107 with its 0.7x reducer has even more dramatic light fall off like that's that's pretty dramatic in the corners there uh so for a full frame reducer it's that's uh it's not quite really illuminating a full frame uh sensor i mean it is i mean we just have a lot of light fall off in the corners okay and then the ascar 0.8x reducer is is doing the best in terms of full frame illumination this brings it down to f5.6 on the ascar 103 and all three of these look quite good in terms of the finished full frame field and you can see this this f4 field at around 420 millimeter focal length i think we're even seeing some of the shark nebula here we're really getting a pretty expansive view in seafious okay next let's look at the aberration inspector with these reducers here is the f4 with the full frame and you can see uh you might have to zoom in a little bit since we're so far zoomed out on these stars you can see they have quite a bit of chromatic aberration everywhere in the field which makes it feel softer in terms of sharpness we're getting you know just a like some magenta and blue haloing and then away from center up here in the corners we're getting sort of birdlike stars a little bit triangle with wings uh that you'd see often with uh camera lenses okay here is the aberration inspector for the zwo with reducer that also has a fair amount of chromatic aberration on the stars and the stars again just like this one have that sort of triangular not quite as much wings on the on the zwo but they're they are pretty soft in the corners too okay and then here is the ascar 0.8x reducer not nearly as much chromatic aberration here and the stars look quite a bit sharper we just have some distortion on the on the very bright stars but the smaller stars are looking pretty good in the corners okay and then we can look at what these would look like with an approximation of a crop sensor i cropped it down to the same size as the 2600 mc and the distortion is basically gone the the stars look really nice across the field there's still a fair amount of chromatic aberration across the field with the f4 reducer though and it's it mostly shows up as sort of um an extended bluish violet halo and then here is the zwo full frame 107 with the reducer the 0.7x and an apsc camera and the stars again look a lot better here with a crop sensor we are seeing sort of the classic split chromatic aberration here or it's green on one side and magenta on the other side of the bright star and then finally here is the 0.8x reducer with the ascar 103 this looks pretty flat for a crop sensor camera across the field you just have the slightest bit of chromatic aberration but the distortion is not really evident okay and then here are some samples of what it looks like if you just stretch a detail and and really up the saturation and you can see the the ascar 103 with the 0.6x reducer has a lot of violet haloing and some magenta chromatic aberration across this sample the zwo width reducer looks a lot better in the center um just a just a bit of chromatic aberration a little bit of uh the same thing going on here but just much less so and then the ascar 103 with the 0.8x reducer looks pretty perfect don't see much uh going on there now let's just compare to a couple of the ones we looked at before so for instance here is now in this corner over here the ascar 103 with just the 1x flattener and you can see between the 0.8x and the 1x pretty similar result not not a huge amount of difference i would just say that the the main thing i see different between these two is the sharpness is better with the 1x flattener um but i would say the 0.8x reducer and the 1x flattener are are going to be much better if you're if you're caring about like the star quality the the f4 is really just if you if you want to go fast um and and then fix some of this some of these problems in post i could also see using the f4 for narrow band that would be a great use for it uh for broadband stuff i would probably go with this 0.8x reducer most often okay and then if you're considering the zwo 107 here is without the reducer so just uh nothing attached just the astrograph on its own and here is with the 0.7x reducer and when i look at these two i can see that the 0.7x reducer is definitely adding some chromatic aberration to the stars so if we zoom in here you can see what i mean they they just have a lot more of this sort of reddish magenta fringing on them compared to this result you're now seeing the names of everyone who supports me in this channel through my patreon campaign the support on patreon really means the world to me because it's how i was able to pursue nebula photos full time and put together complex videos like the one that you just saw and i think my patreon community is very rewarding if you're into this stuff because we do a lot of fun things together like zoom calls monthly imaging challenges and there's a bunch of private channels on my discord server where there are people hanging out and talking about astrophotography 24 hours a day in addition to all that you get direct messaging support with me so if you have questions you can ask and i'll get back to you usually within a day or two so i think it's well worth checking out and it starts at just one dollar per month to join hope you enjoyed this one till next time this has been nico carver clear skies


Our world has faced challenge after challenge over the past few years. During the pandemic, banks fared well and kept supporting people and firms. But now they find themselves in a new world. One of high uncertainty, war, rising prices and interest rate hikes. And this is challenging their resilience. Every year we review our supervisory priorities. So basically the risks and challenges that we look at when we're supervising banks over the next three years. We do this because as the world changes, so do our priorities as supervisors. And today we'll be talking about what our focus will be for the next three years. You're listening to the ECB podcast, bringing you insights into the world of economics and central banking. My name is Katie Ranger. I'm joined today by two guests, Supervisory Board Member Sherstin Afyokhnik and head of supervisory strategy and risk, Mario Cualiarello. Welcome to the podcast, both of you. It's really nice to have you here in the studio. Thank you for having us here, Katie. Now, setting supervisory priorities is all about making sure that banks stay safe and sound in the current environment and that they're fit to withstand challenges that the future brings. If we have a think about where we are right now, central banks are raising interest rates to tackle high inflation. Now, these higher rates are actually good for banks. I mean, it means more profits for them. But at the same time, the economic outlook is worsening and this can have negative consequences for banks. For example, if their customers are not able to repay their loans. Sherstin, let's dive right into the first priority, which is all about ensuring banks are strong in the face of the current economic and geopolitical shocks that we're facing. What kind of areas of banks operations are you going to be looking at in this particular priority? Yeah, thank you for that important question. The first thing I would like to underline is that so far the banking sector as a whole has remained resilient to the large and negative external shocks it has faced in the recent years. It was first the adverse effects with the pandemic had on the economic activity and more recently they fall out from the Russian invasion of Ukraine. So while we don't have data for the full year yet, it's probable that 2022 will turn to be a good year for the banking sector overall. I would encourage those listeners who are interested in the final details of banking performance to take a look at the joint blog post which Mario and I have published about our supervisory priorities. We'll certainly be sure to link to that in the show notes. As you mentioned, the economic outlook has deteriorated significantly in recent months. The Russian war in Ukraine is ongoing. Inflation has been on the rise and central banks have raised their key policy interest rates to fight that. The combination of these factors presents a number of risks to banks and they need to be ready for their potential materialization in the future. So in the near term, we are looking in particular at how banks manage their credit risk. High inflation, rising interest rates and slowing growth are putting pressure on many actors in the economy, especially people and companies. Banks lend to these actors and one big part of this supervisory priority looks at the risk of loans not being able to be paid back. That's what we call credit risk. Okay, that's what credit risk is all about. So it's the possibility that loans might not be able to be paid back. Exactly. So credit risk isn't a newcomer to our supervisory priorities. We were already focusing on credit risk last year in particular because of the pandemic. The support measures that many countries put in place were of course essential for the economy. But they also made it harder for banks to see which loans could turn bad. So that's because the measures kind of artificially supported everyone and it's more difficult. It's a bit of a blurry picture, right, to see which loans are good and which ones maybe the people actually would have struggled if they hadn't had those support measures. Exactly. You are explaining it very well. But now they have to deal with this new world where they are faced with fresh challenges despite having not yet fully recovered from the pandemic. Many companies have been exposed to these economic and geopolitical shocks. For example, for higher energy prices or having to pay more for supplies and labor. They may have to allocate a larger share of their income to these things leaving them with less to pay back loans. This is particularly true for energy intensive sectors most affected by the war such as agriculture and transport and those facing higher costs for materials like construction. So what does it mean for banks? I mean, if they have this increase in credit risk, what does it actually mean for them in practice? Yeah, the increase in credit risk has an impact on banks as a quality of the loans or assets on their books because it will go down. This may mean that they have to hold more capital to cover potential losses. And we have already seen a rise in the number of loans showing an increasing amount of credit risk also known as non performing loans. Mario, I'll turn to you now. Now when it comes to credit risk, what exactly do supervisors look at concretely here? So we know that they're going to be checking that the banks can manage this credit risk. But what does that mean in practice? Okay. Thanks. This is a good question. I mean, first of all, we need to acknowledge there have been some progress in the banking sector over the past years in terms of credit risk management. Still, our supervisors during this year have found that there are still gaps and some shortcomings to be addressed. And I think our concern is that especially in light of the deterioration of the macroeconomic conditions, banks should be ready to put forward the right practices to detect, measure and then mitigate the credit risk so that they can avoid that loans become a problem for the banks for the banks themselves. So how exactly do the supervisors do this? Like what things exactly are they going to be looking at? There are several ways. I would say that the toolkit of the supervisors is quite broad and they can use it for understanding and assessing what banks are doing for flagging deficiencies when this is needed. And of course, require and enforcing corrective actions. Some issues are systemic, so they involve many banks at the same time in a similar way. So in this case, the typical tool is the thematic reviews in which you can look and compare banks across the board. And I think this is one of the benefits of being a European supervisor. You can look horizontally at the sector, you can compare and contrast the banks and also identify good practices and best practices to disseminate. Because you have more of a bird's-eye view over it. Exactly. You can look horizontally and then deep dive when this is needed. We have also the on-site inspections, which is a very powerful tool because the supervisors can go directly in the premises of the banks and look at what banks are doing and the assessment is more direct. Then there are also issues which are idiosyncratic in nature. They involve mostly a few banks and in this case the supervisory teams are following up directly with these specific banks. Perhaps if you want, I can give you a couple of examples for the next round of priorities. One is on the process that banks are following for granting a loan, is what we call loan origination. This is a general issue but we will focus mostly on the housing market but also the commercial real estate, the office space. And here there are clear guidelines at the European level and we want to be sure that banks are following these guidelines. And basically the main principle we are following is that banks should be able to assess since the start of the process how credit-worthy the counterparty is in order to be sure that the customer is getting the right product with the right price and especially that the borrower will be able to repay their loans, is what Kerstin was mentioning earlier. So even before the customer is on their books, making sure as soon as they submit that application for the loan. That's exactly the point. And this is not only a tool for his management, so for the benefit of the banks but it's also a safeguard for the customers of the banks because eventually there is no benefit for them to get a loan they cannot repay at some point. Perhaps another example is more linked to what Kerstin was saying on the impact of the geopolitical risk at large. We will look at the vulnerable sectors. This is something which we have done already in the past and also shows how flexible our toolkit is because we were looking already easier at accommodation, transportation, tourism, so all the sectors hit by the pandemic and now we are shifting the attention to the sectors which are more heavily affected by the war in Ukraine and some issues on the supply chain. So for the following cycle we look more at the companies using a lot of energy, oil, gas and so on, especially manufacturing but also the energy traders. And in this case what we do and our supervisors are doing is to look at the exposures, the assess whether banks are able to monitor the evolution of trade risk and also if they are putting aside enough provisions for dealing with trade risk in case things go wrong. Let's turn now to addressing some more, shall we say, structural weaknesses within the banks themselves. And this is actually another important part of our supervisory priorities, especially as we look beyond the immediate challenges that the economic environment is presenting at the moment. First of all, digitalization. She asked, what are the challenges for banks when it comes to adapting to this ever digital world? So thank you for this important question again. So I mean in our supervisory priorities we highlight that banks need to look beyond the challenges which lie immediately ahead and they have to keep a medium term horizon in their radar screen and certainly the efforts to digitalize should be part and parcel of any strategy for banks in that regard. Digitalization presents a real opportunity for banks to better serve their customers, changing needs and use new technology to be more efficient but it doesn't come without also risk. So banks have to put in place digital transformation strategies. It's not just about being digital for the sake of being more digital. We expect those strategies to ensure that banks' business models are sustainable also for the future and we are seeing some gaps there and we'll be looking closely at those in our supervision. We also want banks to tackle the risks that come with using more innovative technologies. As part of their digital transformation, banks rely more and more on technologies and third party providers for delivering banking services. So more outsourcing also means that banks are reliant on external providers for some of their critical IT services. So this creates more complexity and means banks are much more interconnected with other players all over the world. And this is of course a risk of operational resilience. So we will be publishing details on our expectations in this area and we will continue the discussions on the strategies that banks are now providing. Okay. Now Mario, we talked a bit about the risks that come with moving to more digital operations and Sherstin's mentioned this higher degree of interconnectedness that we have. One thing that comes to mind there for me at least is cyber attacks. What's the situation like on that front for banks? First, as you mentioned, the cyber attacks have become a major challenge for the banks and for the operational resilience of the banks. And they are more and more difficult to handle first because they are getting more complex and second because they are changing over time. So it's difficult to track what is going on in the market and also they are cross-border by construction. So far what we have seen during the pandemic, notwithstanding the acceleration of the digitalization, banks were able to remain resilient and this is a good sign. And overall the operational losses remained limited. But of course the war in Ukraine is bringing new challenges. I think one concern which Kerstin already mentioned is the outsourcing of some of the critical services. Here what we have seen is that there are an increasing number of activities that banks are outsourcing outside. And while this is to some extent a natural evolution given the complexity of the banking business is also an element requiring that there are in place enough risk controls. At the end of the day now producing banking products or services is becoming part of our supply chain and we should have told the links of this chain are equally strong. And while we are direct supervision on some of the links we don't have on all of them. So it is important also that banks have in place internal controls. And some of these external providers, some of the infrastructures are also outside the European Union. This of course makes them more vulnerable. Especially in this kind of geopolitical situation because they can become in a way the victims of some retaliation especially in response to some of the sanctions in this case against Russia. Perhaps if you allow me the last element I would mention which is more related to the governance of the banks and the board composition. All these business is becoming more complicated. So it is important that the right expertise is at the right place. So of course you need the technical experts at the working level but it is equally important that in the management bodies there is sufficient expertise for steering the bank in the right direction. That brings me actually nicely on to the next challenge, the next structural challenge that I want to talk about. We have discussed climate change several times on the podcast already as well as how banks are actually doing in tackling climate risks and we'll be sure to link to those episodes in the show notes. One of our priorities in the more medium term is to continue on our path and to keep on stepping up our efforts in addressing climate change. It's not the first time we included climate change in our supervisory priorities but we are expecting progress at, shall we say, a much faster pace than normal because it's just so urgent. Can I ask you a blunt question? Have you seen any progress from banks since including climate risk in your supervisory priorities? How are things looking there? As you say we have been talking about climate risk for several years now and we are talking about I think first long term risk and now we are talking about medium term risk. But climate change is very real for all of us so the extreme weather that we have seen in Europe is increasing the likelihood of severe damage to infrastructure, houses and livelihoods which of course impact the banks that lend to and do business with those affected. So the climate transition is also gaining momentum triggered in part by Russia's war in Ukraine and the disruption that this has to energy markets. The transition will affect banks' exposures to heavy emitting sectors and those whose business models will not be sustainable in the net zero world. So that's like people with very energy intensive operations but those that emit a lot of fossil fuels and those that really need to change their operations so that we can transition to a net zero world. Exactly, exactly. So in the last year in particular we have come a long way on climate in our supervision. We have carried out the climate risk stress test in the summer and we have done a thematic review of how banks are doing in incorporating climate and environmental risks in their operations and strategies. We saw that banks are making progress in incorporating these risks into their business operations and risk management but there is still a long way to go before they are in line with what we expect as supervisors. Mario, what we just said, there's still a long way to go until banks will be where we want them to be in terms of our supervisory expectations. What exactly will your supervisors be looking at when they go to the banks and look specifically at climate change? Well I mean as Kerstin said we have done a lot of work in 2022 so in our priorities we are planning to follow up on what we have done in 2022 and work and build on it. So first of all we will look at the findings of the stress test and the thematic review and of course we will ask banks to fill the gaps we found in this work. Especially when it comes to weak processes for assessing the impact of the climate and environmental risks but also banks ability to run proper stress test against climate risk. In our assessment some banks do have a good vision on how to support their customers in reaping the benefits of a smooth transition but still struggle to incorporate this vision into the concrete actions. And we will also try to collect and disseminate the good practices because this is part of our job and effort in this field. We are very determined in this activity and expect that by the end of 2024 the banks will be aligned with our expectations on these risks. Well thank you both of you for explaining what our supervisors will be looking at over the next three years. It's really interesting. Now before you go I do have one last question. We always ask our guests on the podcast for a hot tip linked to the topic we're discussing today so broadly speaking keeping banks safe and sound. Have you thought of something to inspire our listeners? Perhaps I could give it a try. I always like the movie The Big Short. There's also the book but the book I think is not as good as the movie for once. And I think for me what is interesting is that there is a group of investors there who understood before anyone else the bubble in the US housing market. And I think this shows that some risks might be obvious and still go undetected by most. And I think this is why we are making an effort in avoiding blind spots in our assessments. But it's not easy. So this is for me the lesson from the movie. That's a great hot tip. One of my favourite films so I'm very happy with that. Thank you so much. Well that brings us to the end of this episode. I want to thank Shestin Afyoknik and Mario Qualiarello for joining the conversation. Make sure you check out the show notes for additional material on this topic. You've been listening to the ECB podcast with Katie Ranger. If you like what you've heard please subscribe and leave us a review. Until next time, thanks for listening.