ECB Publishes Results of Supervisory Review and Evaluation Process
ECB published the aggregate outcome of its 2018 Supervisory Review and Evaluation Process (SREP). The overall 2018 SREP outcome showed that governance and risk management of banks worsened from the previous SREP cycle, while the assessment of management of liquidity and funding risks remained largely unchanged. The assessment concludes that risk management framework of a number of banks should continue to improve.
The overall SREP demand for common equity tier 1 (CET1) capital increased to 10.6% in 2018 from 10.1% in 2017, which was driven by the last step of the phase-in of the capital conservation buffer. The overall SREP demand excludes systemic buffers and countercyclical capital buffer (CCyB). Most significant institutions already have capital levels above the CET1 levels and buffers required by ECB and national authorities, respectively. CET1 is the highest quality capital of a bank, consists largely of common stock, and measures the capital strength of a bank. In addition to asking banks to hold certain amounts of capital, ECB also imposed liquidity measures as part of the SREP, which may include improving the process of assessing their liquidity needs, their funding plans, and/or intraday liquidity. Furthermore, ECB imposed qualitative measures on more than eighty banks, covering a wide range of weaknesses from internal governance and risk management to non-performing loans and data quality.
ECB Banking Supervision prepares an individual SREP decision for each bank it supervises. This is in addition to the daily, ongoing supervision where ECB supervisors assess a bank’s business model, governance, and risk as well as its capital and liquidity. The results of the stress test conducted in 2018 also informed the SREP decision. The ECB Banking Supervision has conducted four SREP exercises since 2014. Using common methodology and common decision-making processes has allowed ECB to compare peers and analyze banks on a broader scale.
Related Links
Keywords: Europe, EU, Banking, SREP, Stress Testing, Basel III, SSM, Regulatory Capital, Banking Supervision, ECB
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Metin Epözdemir
Metin Epözdemir helps European and African banks with design and implementation of credit risk, stress testing, capital management, and credit loss accounting solutions.
Related Articles
BoE Seeks Information Before Migrating Statistical Reporting to BEEDS
The Bank of England (BoE) published the Statistical Notice 2021/09 requiring additional information from firms and software vendors to assist in the onboarding and testing phases for migrating statistical reporting to the BEEDS portal.
FCA Publishes Final Rules on Investment Firms Prudential Regime
The Financial Conduct Authority (FCA) published the final rules on the Investment Firms Prudential Regime (IFPR) to streamline and simplify the prudential requirements for solo-regulated UK firms authorized under the Markets in Financial Instruments Directive (MiFID).
CFRF Publishes Guides to Manage Financial Risks from Climate Change
The working groups of the Climate Financial Risk Forum (CFRF) published a second round of guides (or Session 2 guides), written by the industry for the industry, to help financial firms manage climate-related financial risks.
PRA Finalizes Policy for Non-Performing Exposure Securitizations
The Prudential Regulation Authority (PRA) published the final Policy Statement PS24/21 that contains the new Non-Performing Exposures Securitization Part of the PRA Rulebook and an updated Supervisory Statement SS10/18 on the general requirements and capital framework with respect to securitizations.
EBA Updates Filing Rules for Supervisory Reporting
The European Banking Authority (EBA) published version 5.1 of the filing rules for supervisory reporting.
ECB Amends Guideline on Procedures for Collection of AnaCredit Data
The European Central Bank (ECB) Guideline 2021/1829 on the procedures for the collection of granular credit and credit risk data has been published in the Official Journal of European Union.
ECB Amends Guideline on Procedures for Collection of AnaCredit Data
The European Central Bank (ECB) Guideline 2021/1829 on the procedures for the collection of granular credit and credit risk data has been published in the Official Journal of European Union.
EBA Publishes Standards on Disclosure of Investment Policy Under IFR
The European Banking Authority (EBA) published the final draft regulatory technical standards on disclosure of investment policy by investment firms, under the Investment Firms Regulation (IFR).
EU to Explore Potential of Establishing a Joint Cyber Unit
The European Council adopted conclusions inviting the European Union (EU) and the member states to further develop the cybersecurity crisis management framework.
EC Sets Out Work Program for 2022
The European Commission (EC) adopted the work program for 2022.
