EBA publishes final regulatory products to harmonise the supervisory review and evaluation process of investment firms

21 July 2022

The European Banking Authority (EBA) jointly with the European Securities and Markets Authority (ESMA), published today the final Guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP) for investment firms. The EBA published also the final draft Regulatory Technical Standards (RTS) on Pillar 2 add-ons for investment firms. Both regulatory products are based on the Investment Firms Directive (IFD) and aim to harmonise the supervisory practices regarding the supervisory review and evaluation process of investment firms.

Joint SREP Guidelines for investment firms

The final Joint SREP Guidelines have been developed together with the European Securities and Markets Authority (ESMA). They set out the common process and criteria for the assessment of the main SREP elements, including:

  • business model;
  • governance arrangements and firm-wide controls;
  • risks to capital and capital adequacy;
  • liquidity risk and liquidity adequacy.

As part of this assessment, a scoring system is introduced to facilitate the comparability across firms. The joint Guidelines also specify the monitoring of key indicators and the use of supervisory measures as a result of the SREP assessment and put forward provisions on the application of SREP in the cross-border context.

The criteria for the assessment of risks in the joint Guidelines follow the requirements of the Investment Firms Regulation (IFR) and Investment Firms Directive (IFD) and the procedures and methodologies provided are proportionate to the nature, size and activities of investment firms.

RTS on pillar 2 add-ons

The RTS ensure a consistent EU wide determination of additional capital requirements to cover risks or elements of risks not covered or insufficiently covered by Pillar 1 requirements.

These final draft RTS provide technical details, including specific indicative metrics, to assess and measure material risks not otherwise captured or inadequately captured by Pillar 1 requirements. Such technical details will ensure common supervisory practices in the determination of additional own funds requirements.

Legal basis and next steps

The final joint SREP Guidelines has been developed together with ESMA on the basis of Article 45(2) of Directive (EU) 2019/2034.

The final draft RTS have been developed, in consultation with ESMA, on the basis of Article 40(6) of Directive (EU) 2019/2034, which mandates the EBA to specify how the risks and elements of risks are to be measured for the determination of additional capital requirements.

Press contacts

Franca Rosa Congiu

press@eba.europa.eu | +33 1 86 52 7052 | Follow @EBA_News