October 31, 2017

EBA launched a public consultation to review three guidelines aimed at further enhancing institutions' risk management and supervisory convergence in the Supervisory Review and Evaluation Process (SREP). These three guidelines are SREP guidelines, interest rate risk in the banking book (IRRBB) guidelines, and institutions’ stress testing guidelines. The consultations on all three guidelines run until January 31, 2018.

The overall SREP framework and the guidelines remain intact and the consultation is only focused on the elements being updated. The revisions enhance the requirements for supervisory stress testing and explain how stress testing outcomes will be used in setting Pillar 2 capital guidance (P2G). The guidelines have also been updated with assessments of internal governance based on the recently revised EBA guidelines on internal governance. The revised IRRBB guidelines reflect developments in the BCBS 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 on institutions' stress testing update the 2010 guidelines of EBA, to reflect industry practices and the incorporation of recovery planning. The revised guidelines also feature a common taxonomy on stress testing.

This public consultation is in accordance with the Pillar 2 Roadmap that was published in April 2017. In accordance with the Pillar 2 Roadmap, these three guidelines are being consulted in parallel and are expected to be implemented by January 01, 2019 for the 2019 cycle of SREP and joint decisions on institution-specific prudential requirements. The comprehensive EU SREP framework, which was introduced by EBA in 2014, is now well-established and in use by supervisors across the EU. Following the global regulatory developments as well as EBA's supervisory convergence assessments, specific changes are needed to reinforce the framework as set out in EBA's Pillar 2 Roadmap.

 

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Comments Due Date: January 31, 2018

Keywords: Europe, EU, Banking, SREP, Stress Testing, IRRBB, Pillar 2, EBA