May 24, 2019

ECB published a booklet on the Supervisory Review and Evaluation Process (SREP) methodology for less significant institutions (LSIs). This methodology has been developed by ECB and the national competent authorities. This common methodology, applicable to the supervision of smaller banks in the euro area, is based on principles and methods used in the supervision of significant institutions but is adapted, simplified, and tailored to the specificities of LSIs. It aims to foster a consistent supervisory approach in the euro area and to support national competent authorities in their day-to-day supervisory responsibilities. The national competent authorities are implementing the harmonized SREP methodology for LSIs and aiming for full implementation by 2020.

The booklet highlights that, from 2019, the parallel run of the liquidity assessment methodology will no longer take place, as the SREP methodology will be applied more consistently. Additionally, national competent authorities are expected to implement the Pillar 2 Guidance, in line with the revised EBA Guidelines on SREP. In the coming years, supervisors will also gradually put more focus on IT risk in their SREP assessments, consistent with the applicable international supervisory standards and in line with Single Supervisory Mechanism (SSM) supervisory priorities. ECB and national competent authorities will continue to develop and maintain a full-fledged training program for supervisors in the SSM.

As per the methodology, national competent authorities continue to retain full responsibility, as direct supervisors of LSIs, for carrying out the assessments and deciding on capital, liquidity, and qualitative measures. The methodology reflects the principle of proportionality as it sets out the minimum extent to which supervisors must engage with an LSI, according to the priority assigned to the LSI and the nature of its business (minimum supervisory engagement model). As a result, the SREP differs between LSIs, for example, in terms of how intense the assessment is, what information the LSI needs to submit to the supervisors, and what the supervisors expect from the LSI. The methodology also offers some flexibility to the national competent authorities. Flexibility in the SREP plays an important role when it comes to assessing the Internal Capital Adequacy Assessment Process (ICAAP), the Internal Liquidity Adequacy Assessment Process (ILAAP), and the stress tests for LSIs. The SREP for LSIs is an ongoing process and the methodology will continue to evolve in the future.

 

Related Links

Keywords: Europe, EU, Banking, SREP, SSM, Less Significant Institutions, SREP Methodology, Supervisory Approach, Proportionality, Stress Testing, ECB

Related Articles
News

EBA Consults on Guidelines for Loan Origination and Monitoring in EU

EBA launched a consultation on the guidelines on loan origination and monitoring in EU.

June 19, 2019 WebPage Regulatory News
News

OCC Bulletin on Risk Management Guidance for Home Mortgage Lending

OCC published Bulletin 2019-28 on risk management guidance for higher-loan-to-value (LTV) lending activities in communities targeted for revitalization.

June 19, 2019 WebPage Regulatory News
News

IFRS to Discuss Phase II of IBOR Reform at July Meeting of ASAF

IFRS published agenda papers for the Accounting Standards Advisory Forum (ASAF) meeting to be held on July 11–12, 2019.

June 19, 2019 WebPage Regulatory News
News

EC Amends Regulation Supplementing Solvency II Directive

EC published the Delegated Regulation (EU) 2019/981 that amends the Regulation (EU) 2015/35, which supplements Solvency II Directive (2009/138/EC) on the taking-up and pursuit of the business of insurance and reinsurance.

June 18, 2019 WebPage Regulatory News
News

IOSCO Report Examines Application of International Cyber Standards

IOSCO published a final report that examines the application of the three internationally recognized cyber standards and frameworks by IOSCO member jurisdictions.

June 18, 2019 WebPage Regulatory News
News

PRA Launches 2019 Stress Test Exercise for Life and General Insurers

PRA has launched the biennial insurance stress test and is asking the largest regulated life and general insurers to provide information about the impact of a range of stress tests on their business.

June 18, 2019 WebPage Regulatory News

SRB Outlines Upcoming Changes in Context of CRR2 and BRRD2

SRB published presentations made at the 8th Industry Dialogue in Brussels.

June 18, 2019 WebPage Regulatory News
News

EC Publishes Guidelines on Climate-Related Information Reporting

EC published the guidelines and associated frequently asked questions (FAQs) on corporate climate-related information reporting, as part of its sustainable finance action plan.

June 18, 2019 WebPage Regulatory News
News

PRA Finalizes Reporting Amendments to Pillar 2 Liquidity Framework

PRA published the final Policy Statement PS13/19 on regulatory reporting amendments and clarifications to the Pillar 2 liquidity framework for banks in UK.

June 17, 2019 WebPage Regulatory News
News

FSB Assesses Implementation of Compensation Standards and Principles

FSB published the sixth progress report on the implementation of its principles and standards for sound compensation practices in financial institutions.

June 17, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 3276