Consultation on revised draft Guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP) and supervisory stress testing

The European Banking Authority (EBA) launched today a public consultation on its revised Guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP) and supervisory stress testing. The comprehensive revisions aim at implementing the recent amendments to the Capital Requirements Directive (CRD V) and Capital Requirements Regulation (CRR II), as well as aligning with other regulatory developments and best supervisory practices. The consultation runs until 28 September 2021.

SREP is an ongoing supervisory process bringing together findings from all supervisory activities into a comprehensive supervisory overview of an institution. These Guidelines aim at achieving convergence of practices followed by competent authorities across the EU in their SREP and supervisory stress testing processes.

The current review of the SREP Guidelines affects all main SREP elements, including (i) business model analysis, (ii) assessment of internal governance and institution-wide control arrangements, (iii) assessment of risks to capital and capital adequacy to cover these risks, and (iv) 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 CRD V and CRR II include the following:

• reviewing institutions’ categorisation 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 Directive 2013/36/EU, to ensure that they reflect a purely microprudential 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 in order 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 the assessment of liquidity risk and liquidity adequacy to align them with the current regulatory framework.

Consultation process

Comments to the two consultations can be sent to the EBA by clicking on the "send your comments" button on the respective consultation page. Please note that the deadline for the submission of comments is 28 September 2021.

A public hearing will take place on 31 August 2021 from 11:00 to 12:30.

All contributions received will be published following the end of the consultation, unless requested otherwise.

Legal basis, background and next steps

These draft Guidelines have been developed on the basis of Article 107(3) of Directive 2013/36/EU, which mandates the Authority to further specify the common procedures and methodologies for the SREP.

The EBA Guidelines will apply to competent authorities across the EU. Once the revised Guidelines will enter into force, the current SREP Guidelines will be repealed.