Supervisory Review and Evaluation Process (SREP) and Pillar 2

The aim of the Pillar 2 processes is to enhance the link between an institution's risk profile, its risk management and risk mitigation systems, and its capital planning. Pillar 2 can be divided into two major components: (i) aimed at institutions, where those are expected to establish sound, effective and complete strategies and processes to assess and maintain, on an ongoing basis, the amounts, types and distribution of internal capital commensurate to their risk profiles (ICAAP), as well as robust governance and internal control arrangements, and (ii) supervisory review and evaluation process (SREP). The key purpose of SREP is to ensure that institutions have adequate arrangements, strategies, processes and mechanisms as well as capital and liquidity to  ensure a sound management and coverage of their risks, to which they are or might be exposed, including those revealed by stress testing and risks institution may pose to the financial system.

This section brings together the EBA's work on the supervisory review and examination process in general and on some specific Pillar 2 topics, like concentration and diversification.

Technical Standards, Guidelines & Recommendations

  • Guidelines on stress testing

    These final Guidelines on stress testing aim to achieve convergence of the practices followed by institutions for stress testing across the EU as they provide detailed guidance on the way institutions should design and conduct a stress testing programme/framework. The Guidelines also feature a common taxonomy on stress testing and are based on the previous CEBS Guidelines on Stress Testing (GL32).

    Status: Final (awaiting translation into the EU official languages)

  • Guidelines for common procedures and methodologies for the supervisory review and evaluation process (SREP) and supervisory stress testing

    The Guidelines for common procedures and methodologies for the supervisory review and evaluation process (SREP) and supervisory stress testing will be applied in the supervision of all institutions across the Union and represent a major step forward in forging a consistent supervisory culture across the single market. These Guidelines provide a common framework for the work of supervisors in their assessment of risks to banks’ business models’, their solvency and liquidity as well as the conduct of supervisory stress testing.

    Status: Final (awaiting translation into the EU official languages)

  • Guidelines on supervision of significant branches

    These Guidelines are designed to facilitate cooperation and coordination between the Competent Authorities (CAs). They will assist them in supervising the largest systemically important branches, the so-called “significant-plus” branches, which require intensified supervision.

    Status: Final and translated into the EU official languages

  • Guidelines on Technical aspects of the management of interest rate risk arising from non-trading activities under the supervisory review process

    These Guidelines set out high-level guidance, addressed to both credit institutions and investment firms, related to interest rate risk arising from non-trading activities (IRRBB). The paper sets out supervisory expectations regarding the measurement, management and governance arrangements of IRRBB and its reflection in the ICAAP. The guidelines also define the supervisory outlier test requirements for the assessment of institutions’ resilience to interest rate changes.

    Status: Final (awaiting translation into the EU official languages)

  • Guidelines on internal governance (revised)

    These draft Guidelines aim at further harmonising institutions’ internal governance arrangements, processes and mechanisms across the EU, in line with the new requirements in this area introduced in the Capital Requirements Directive (CRD) and also taking into account the proportionality principle.

    Status: Final and translated into the EU official languages

  • Joint ESMA and EBA Guidelines on the assessment of the suitability of members of the management body

    The draft Guidelines aim at further improving and harmonising suitability assessments within the EU financial sectors and so ensure sound governance arrangements in financial institutions.”

    Status: Final and translated into the EU official languages

  • Guidelines on ICT Risk Assessment under the SREP

    These draft Guidelines are addressed to competent authorities and aim at promoting common procedures and methodologies for the assessment of ICT risk.

    Status: Final and translated into the EU official languages

  • Guidelines on ICAAP and ILAAP information

    These Guidelines specify the information competent authorities will collect from institutions regarding the internal capital adequacy assessment process (ICAAP) and the internal liquidity adequacy assessment process (ILAAP). These draft Guidelines aim at facilitating the consistent approach to the supervisory assessment of ICAAP and ILAAP frameworks as well as the assessment of reliability of institutions’ own capital and liquidity estimates as part of the supervisory review and evaluation process (SREP) following the criteria and methodologies specified in the EBA Guidelines on common procedures and methodologies for SREP.

    Status: Final and translated into the EU official languages

  • Guidelines on the treatment of CVA risk under SREP

    The Guidelines are based on a policy recommendation contained in the EBA’s CVA report and aim to provide a common European approach to assessing CVA risk under SREP. Additionally, these Guidelines will provide a common European approach to the assessment of capital adequacy of own funds and the determination of potential additional own funds requirements for CVA risk.

    Status: Under development

  • Guidelines on Technical aspects of the management of interest rate risk arising from non trading activities in the context of the supervisory review process

    These guidelines on technical aspects of the management of interest rate risk arising from non trading activities are aimed at improving the management of IRRBB risks by institutions, and to promote the convergence of supervisory practices in reviewing and evaluating institutions under the Pillar 2 assessment process.

    Status: Final and translated into the EU official languages

  • Guidelines on capital measures for foreign currency lending

    These Guidelines on capital measures for foreign currency lending (FX lending) aimed at providing guidance to national competent authorities on how to deal with the specific risk of FX lending to unhedged borrowers as part of the Supervisory Review and Evaluation Process (SREP).

    Status: Repealed

  • Guidelines for the joint assessment and joint decision regarding the capital adequacy of cross-border groups

    The Capital Requirements Directive (CRD) requires that the consolidating supervisor and supervisors of subsidiaries involved in the supervision of an EEA cross-border banking group do everything within their power to reach a joint decision on the application of the Pillar 2 provisions related to the Internal Capital Adequacy Assessment Process (ICAAP) and to the Supervisory Review and Evaluation Process (SREP). These Guidelines provide concrete guidance on how to cooperate in the risk assessment process and on how to apply the CRD provisions regarding ICAAP, SREP and the prudential measures subject to the joint decision process. Their ultimate aim is to ensure closer convergence of supervisory practices with regard to the joint decision process, while providing some necessary flexibility for individual colleges.

    Status: Repealed

  • Guidelines on the management of concentration risk under the supervisory review process

    These Guidelines follow a holistic approach which aims at ensuring sound overall concentration risk management; this means that institutions are expected to identify and assess all aspects of concentration risk, moving further away from the traditional analysis related only to intra-risk concentration within the credit risk. The guidelines are structured into five major sections. The first provides the definition of concentration risk and its two-fold focus on intra- and inter-risk concentrations (Section 2). Section 3 deals with general principles for management of concentration risk while the Section 4 addresses aspects of concentration risk management specific to particular risk areas (credit, market, operational and liquidity risks) and Section 5 provides underpinnings for the supervisory review and evaluation.

    Status: Repealed

  • Revised Guidelines on Stress Testing

    These guidelines will assist institutions in understanding supervisory expectations of appropriate stress testing governance and infrastructure, and also cover the use of stress testing as a risk management tool. They provide high level guidance on how Stress Test could be conducted by institutions and assessed by supervisors, namely concerning desirable features relating to the scope, calibration, frequency, documentation or risks covered.

    Status: Final and translated into the EU official languages

  • Guidelines on Stress Testing

    These Guidelines provide high level guidance on how Stress Test could be conducted by institutions and assessed by supervisors, namely concerning desirable features relating to the scope, calibration, frequency, documentation or risks covered. As reviewing Pillar 1 risks is part of the supervisory review process, this paper reflects also interactions with relevant provisions regarding Pillar 1. The Guidelines provide additional technical guidance to complement the Guidelines on the Supervisory Review Process issued in January 2006 in the area of stress testing.

    Status: Repealed

  • Guidelines on outsourcing

    The Guidelines aim at promoting an appropriate level of convergence in supervisory approaches to outsourcing. The Guidelines are based on current supervisory and market practices and also take into account international and European developments in the field of outsourcing.

    Status: Final and translated into the EU official languages

  • Guidelines on the Application of the Supervisory Review Process under Pillar 2

    These Guidelines set out guidance on the application of supervisory review and evaluation process and aimed both at institutions by providing details regarding organising internal governance and ICAAP processes, and supervisors by specifying principles and features of supervisory review and evaluation process and supervisory risk assessment systems. The Guidelines also outline the fundamental principles of ICAAP-SREP dialogue between the institutions and their supervisors.

    Status: Repealed

Opinions, Reports and other Publications

 

Opinions

 

Other Publications

  • EBA outlines roadmap of its plan to update 2017-2018 SREP
    The European Banking Authority (EBA) issued today a roadmap outlining its plans to update the common European framework for the supervisory review and evaluation process (SREP) in 2017-2018. The roadmap explains the multi-stage approach the EBA intends to follow in updating the EU SREP framework in 2017-2018 and beyond, and summarises the ongoing policy initiatives affecting Pillar 2/SREP that will need to be reflected in the revised EBA guidelines on Pillar 2 topics.

    .. Read more »

    11/04/2017