EBA to Issue Stress Test Results in July, Consults on SREP Guidelines
EBA announced that individual results for the banks participating in the 2021 EU-wide stress test, along with a report summarizing the results in aggregate terms, will be published on July 30, 2021. In addition, EBA launched a public consultation on the revised guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP) and supervisory stress testing. The comprehensive revisions are intended to implement recent amendments to the Capital Requirements Directive (CRD5) and the Capital Requirements Regulation (CRR2) as well as to align the guidelines with other regulatory developments and best supervisory practices. The comment period for the proposed guidelines ends on September 28, 2021.
SREP is an ongoing supervisory process bringing together findings from all supervisory activities into a comprehensive supervisory overview of an institution. The guidelines being revised are aimed to achieve convergence of practices followed by competent authorities across EU, in their SREP and supervisory stress testing processes. This ongoing review of the SREP guidelines affects all main SREP elements, including business model analysis, assessment of internal governance and institution-wide control arrangements, assessment of risks to capital and capital adequacy to cover these risks, and assessment of liquidity and funding risks and adequacy of liquidity resources to cover such risks. The main amendments implementing the requirements laid down in the CRD5 and CRR2 include the following:
- Reviewing institutions’ categorization and application of the minimum engagement model to reflect the new definitions on small and non-complex as well as large institutions, thus better embedding the proportionality principle
- Incorporating an assessment of money laundering and terrorist financing (ML/TF) risks, in line with the EBA opinion on how to take into account ML/TF risks in the SREP published in November 2020
- Reviewing the provisions on Pillar 2 capital add-ons and the Pillar 2 guidance in accordance with Articles 104a and 104b of CRD4, to ensure that they reflect a purely micro-prudential perspective
- Providing clarifications on the assessment of the risk of excessive leverage and the related Pillar 2 capital add-ons and the Pillar 2 guidance to reflect the separate stack of own funds requirements based on the leverage ratio
- Adjusting the requirements for the assessment of the interest rate risk in the non-trading book as well as assessing liquidity risk and liquidity adequacy to align them with the current regulatory framework
EBA is consulting only on changes to the existing SREP guidelines and plans to finalize the guidelines once the consultation responses have been assessed. On publication of the final guidelines, the existing SREP guidelines will be repealed and replaced.
Related Links
- Press Release on Stress Test Results
- Press Release on SREP Guidelines
- Consultation Paper on SREP Guidelines (PDF)
Comment Due Date: September 28, 2021
Keywords: Europe, EU, Banking, SREP, Stress Testing, CRR2, CRD5, Basel, Pillar 2, Regulatory Capital, IRRBB, Liquidity Risk, 2021 Stress Test, ML/TF Risk, EBA
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.
Previous Article
BOM Publishes Several Regulatory Updates in June 2021Related Articles
EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
EP Reaches Agreement on Corporate Sustainability Reporting Directive
The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).
PRA Consults on Model Risk Management Principles for Banks
The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.
EC Regulation Amends Standards for Calculating Credit Risk Adjustments
The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.
BIS Hub Updates Work Program for 2022, Announces New Projects
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
EIOPA Issues Cyber Underwriting Proposal, Statement on Open Insurance
The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.
US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
EIOPA Consults on Review of Securitization Framework in Solvency II
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.
UK Authorities Issue Regulatory and Reporting Updates for Banks
The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.
BCBS Issues Climate Risk Principles while HKMA Expresses Its Support
The Basel Committee on Banking Supervision (BCBS) issued principles for the effective management and supervision of climate-related financial risks.
