EBA, in accordance with its Pillar 2 Roadmap, published the final revised guidelines to further enhance institutions' risk management and supervisory convergence in the supervisory review and examination process (SREP). The package includes three guidelines that focus on interest rate risk in the banking book (IRRBB) and on stress testing, particularly its use in setting Pillar 2 capital guidance.
Final report on the guidelines on the revised common procedures and methodologies for SREP and supervisory stress testing. The changes to the SREP Guidelines do not alter the overall SREP framework and mainly aim to enhance the requirements for supervisory stress testing and explain how stress testing outcomes will be used in setting Pillar 2 Guidance. A consolidated version of the revised SREP guidelines has been published along with the Final Report. The revised guidelines replace the existing guidelines and will be applicable from January 01, 2019. The changes and additions to the SREP guidelines, which are outlined in the Final Report, include
- A section on Pillar 2 Capital Guidance
- Supervisory stress testing requirements
- A clarification on the scoring framework
- Consistency checks with relevant EBA standards and guidelines, in the areas of internal governance and institution-wide controls assessment
Revised guidelines on the management of interest rate risk arising from non-trading activities. The revised IRRBB guidelines reflect developments in BCBS standards and clarify internal governance and supervisory outlier tests requirements during the first phase of the European implementation of the Basel standards. The revisions are, therefore, intended to act as a bridge to the future requirements, which will be incorporated in the CRD V/CRR2 framework. The revised guidelines replace the existing guidelines and will be applicable from June 30, 2019 with transitional arrangements for specific provisions until December 31, 2019.
Revised final guidelines on stress testing of institutions. The revised guidelines update the 2010 guidelines of EBA to reflect the industry practices and the incorporation of recovery planning. The revised guidelines provide detailed guidance on the way institutions should design and conduct a stress testing program; they also feature a common taxonomy on stress testing. The revised guidelines replace the existing guidelines and will be applicable from January 01, 2019.
The comprehensive EU SREP framework, which was introduced by EBA in 2014, is now well-established and in use by supervisors across EU. Following the global regulatory developments, as well as the supervisory convergence assessments of EBA, specific changes were needed to reinforce the framework as set out in the Pillar 2 Roadmap of EBA.
- Press Release
- Guidelines on SREP (PDF)
- Consolidated Guidelines on SREP and Stress Testing (PDF)
- Guidelines on IRRBB (PDF)
- Guidelines on Stress Testing of Institutions (PDF)
- Pillar 2 Roadmap of EBA
Effective Date: January 01, 2019 (Stress Testing Guidelines); June 30, 2019 (IRRBB Guidelines)
Keywords: Europe, EU, Banking, Stress Testing, SREP, IRRBB, Guidelines, Pillar 2, EBA
Previous ArticleEBA Publishes Risk Dashboard for the First Quarter of 2018
EBA issued a revised list of validation rules with respect to the implementing technical standards on supervisory reporting.
EBA published its response to the call for advice of EC on ways to strengthen the EU legal framework on anti-money laundering and countering the financing of terrorism (AML/CFT).
NGFS published a paper on the overview of environmental risk analysis by financial institutions and an occasional paper on the case studies on environmental risk analysis methodologies.
MAS published the guidelines on individual accountability and conduct at financial institutions.
APRA published final versions of the prudential standard APS 220 on credit quality and the reporting standard ARS 923.2 on repayment deferrals.
SRB published two articles, with one article discussing the framework in place to safeguard financial stability amid crisis and the other article outlining the path to a harmonized and predictable liquidation regime.
FSB hosted a virtual workshop as part of the consultation process for its evaluation of the too-big-to-fail reforms.
ECB updated the list of supervised entities in EU, with the number of significant supervised entities being 115.
OSFI published the key findings of a study on third-party risk management.
FSB is extending the implementation timeline, by one year, for the minimum haircut standards for non-centrally cleared securities financing transactions or SFTs.