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November 21, 2017

EBA published the third annual report on the convergence of supervisory practices across EU, in accordance with Article 107 of the Capital Requirements Directive (CRD: Directive 2013/36/EU). The report reviews consistency in the application of the Supervisory Review and Evaluation Process (SREP), with the aim to promote comparable supervisory approaches and consistency in supervisory outcomes across the single market.

EBA notes that good progress has been made by competent authorities in the implementation of the SREP guidelines as well as in taking forward recommendations and observations made by EBA during the 2016 bilateral convergence visits. A significant degree of convergence across the single market has already been achieved through the application of the EBA SREP guidelines. However, the report highlights a number of remaining challenges in converging capital adequacy assessments and determining institution-specific additional own funds requirements (P2R). The report observes different approaches in the use of the outcomes for banks' own internal capital adequacy assessment process (ICAAP), disparity of risk taxonomies, and differences in the clarity of the risk-by-risk determination of Pillar 2 Requirements (P2R), in addition to the use of P2R for macro-prudential purposes. The report also notes the widespread use of Pillar 2 Guidance, but limited experience in this area makes the analysis of the first wave of application of Pillar 2 Guidance difficult.


Related Link: Report (PDF)

Keywords: Europe, Banking, CRD, SREP, ICAAP, Pillar 2, EBA

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