SSM SREP

Methodology Booklet

[2015 edition – to be updated for 2016]

Level Playing Field - High Standards of Supervision - Sound Risk Assessment

SREP - Key achievements ECB-PUBLIC

 Level playing field : SREP for the first time carried out for Significant
Institutions according to:
• a common methodology
• a common decision-making process allowing for peer comparisons
and transversal analyses on a wide scale

 High standards of supervision

• Follow the EBA guidelines on SREP and draw on leading practices
within the SSM and as recommended by international bodies
• Proportionality, flexibility and continuous improvement
• Supervisory decisions - not only additional capital requirements but also
additional measures tailored to banks’ specific weaknesses

 Sound risk assessment

• Combination of quantitative and qualitative elements
• Holistic assessment of institutions’ viability taking into account
their specificities
• Forward-looking perspective

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Table of contents

1 SREP - Legal Basis

2 SREP - Overview

3 SREP - Methodology

4 SREP - Outcome

5 SREP - Where do we stand?

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1. Legal Basis ECB-PUBLIC

The SSM methodology implements Union law, EBA Guidelines

and supervisory best practices

SREP in CRD IV - Article 97

...the competent authorities shall review the arrangements,
strategies, processes and mechanisms implemented by the
institutions and evaluate:
(a) risks to which the institutions are or might be exposed;
(b) risks that an institution poses to the financial system and
(c) risks revealed by stress testing taking into account the
nature, scale and complexity of an institution's activities.

RTS, ITS and EBA Guidelines

• Implementing Technical Standards (ITS) on joint decisions on

prudential requirements
• Regulatory Technical Standards (RTS) and ITS on the functioning
of colleges of supervisors
• Guidelines on common procedures and methodologies for the SREP
(EBA/GL/2014/13) - 19 December 2014

BCBS and FSB Principles

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2. SREP - Overview (1/2) ECB-PUBLIC

Supervisors at ECB and in 19 countries jointly prepared SREP decisions for SSM
Significant Institutions through a common process for the first time

Methodology
& Standards
Development
Division
Joint
Supervisory
Teams
(JSTs)

1. Preparation

Horizontal

Governing
3. Decision * 2. Evaluation functions:
JSTs Methodology &
Supervisory Council Standards
Development,
Board Risk Analysis…

Supervisor Supervisor
y Colleges y
Colleges

* Note: decision finalised after right-to-be-heard procedure and Governing Council non-objection.

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2. SREP - Overview (2/2) ECB-PUBLIC

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Underlying infrastructure built in less than
one year
 Common integrated IT system
 Secured Information flow between all Experienced supervisors
supervisors from the ECB and NCAs:
 Bank data quality controls at 2 levels: NCAs and - 19 Member States
involved
ECB
- 26 National authorities
 Full use of NCA and ECB resources
involved
 In-depth field testing of the methodology in H2
2014 – Q1 2015

SREP managed as a key project

 Common timeline
 Steering by Senior Management
 Project management, methodology development
and horizontal consistency ensured by the ECB’s
DG MS IV
 Full use of ECB and NCA expertise - especially in
methodology development - through thematic
workshops and dedicated Q&A sessions delivered
by DG MS IV Execution fully in line with
plan SREP completed in IT
system
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3.1. SREP - Methodology: common framework (1/3) ECB-PUBLIC

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Building block approach in line with EBA Guidelines

SREP methodology at a glance: four key elements

Feeds into the Supervisory Examination Programme (SEP)

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3.1. SREP - Methodology: common framework (2/3) ECB-PUBLIC

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All four SREP elements follow a common logic
ensuring a sound risk assessment

Three phases in on-going risk

Risk Level (RL) vs. Risk Control (RC)
assessment for each of four elements
3. 4.
Phase 2 Phase 3 2. Internal
Phase 1 1. Business Governance Assessment Assessment
Automated Supervisory
Data gathering model of Capital of Liquidity
anchoring score Judgement and RM
risks risks

Adjustments
RL  n/  
• Scoring Risk
Main based on a
sources:
Level
additional factors
RC n/   
• Formal
• quarterly and considering a
compliance
ITS banks’
• STE reports checking of Risk Combined
specificities and
Control score (RL + RC)
complexity
n/a: not applicable

The intensity of the supervisory engagement is decided based on banks’ risk

profile and size.
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Constrained judgement
 Fair flexibility in a four-grade scale where Phase 2
score can be improved by one notch and
worsened by two notches based on
supervisory judgment

 Ensures
• athe right balance
common between:
process, ensuring consistency
across the SSM banks and defining an anchor
point,
• and the necessary supervisory judgment, Scale of the constrained judgement
to take into account the specificities and
complexity of an institution. Phase 3 scores
1 2 3 4
 Adjustments go in both directions and are 1
2
fully documented by the JST in the integrated IT

Phase 2 scores
3
 Departing
system from constrained judgement not 4
allowed as a rule Phase 3 score possible
Phase 3 score
impossible
 Constrained judgment effectively used by JSTs for
all risk categories in both directions: improving as
well as worsening Phase 2 scores

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3.2. SREP - Methodology: Element 1 (1/2) ECB-PUBLIC

Business Model

 Identification of the areas of

focus (e.g. main activities)
 Assessment of the
business
environment
 Analysis of the forward Examples of identified Business Models
looking strategy and
financial plans
• viability (within 1 year)
 Assessment of the  Custodian
• sustainability (within 3 years)
business model:  Diversified lender
• sustainability over the cycle
(more than 3 years)  Retail lender
 Assessment of the key  Small universal bank
vulnerabilities  Specialised lender
 Universal bank

In line with EBA SREP

Guidelines, § 55-57

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3.2. SREP - Methodology: Element 1 (2/2) ECB-PUBLIC

Business Model

RL
final
score

Phase 1 Phase 2 Phase 3

 Information gathering  Automated  Comprehensive analysis

and understanding anchoring score
materiality of based on  Used to adjust phase 2
business indicators, such as score taking into
areas ROA, Cost consideration the
Income ratio… bank’s specificities

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3.3. SREP - Methodology: Element 2 (1/2) ECB-PUBLIC

Internal Governance & Risk Management

 Internal governance
framework (including
key control functions
such as risk management, Two examples of Key Questions
internal auditing, compliance)
 Risk management framework  Is there a compliance function in place
and risk culture that is hierarchically and functionally
separate and operationally
 Risk infrastructure, internal independent from any business activity
data and reporting responsibilities?
 Remuneration policies  Are there mechanisms in place to
and practices ensure that senior management can
act in a timely manner to effectively
manage, and where necessary
mitigate, material adverse risk
In line with EBA SREP exposures, in particular those that are
Guidelines, § 81-82 close to or exceed the approved
risk appetite statement or risk limits?

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3.3. SREP - Methodology: Element 2 (2/2) ECB-PUBLIC

Internal Governance & Risk Management

Phase 1 Phase 2 Phase 3 RC

Risk
contro Informatio Formal RC main final
l
n compliance assessmen score
gathering checking t

Phase 1 Phase 2 Phase 3

 Information gathering  Check compliance with  Comprehensive
e.g. through the CRD provisions analysis
thematic review on  Specific analysis of  Used to adjust phase 2
internal governance
e.g: check taking into
• organisational
consideration the
structure, bank’s specificities
• internal audit,
• compliance,
• remuneration,
• risk appetite,
• risk infrastructure,
• reporting…

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3.4. SREP - Methodology: Element 3 Overview ECB-PUBLIC

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Risks to Capital

Three different perspectives (“3 Blocks”)

Block 1 Block 3
Block 2
Supervisory Forward-looking
Bank’s perspective
perspective perspecti
ve
Four Risk  Information  Information
categories: Credit gathering: gathering : For SREP 2015
risk, Market risk, e.g. bank
Operational risk, ICAAP internal  Strongest weight
IRRBB reports Stress on Block 1
 Anchoring Tests  Lot of
 Informati
assessment:  Anchoring heterogeneity in
on
with proxies assessment: Block 2 assessment
gathering
 Anchoring in line with supervisory results
the EBA Stress Tests
scores on risk   Block 3 not yet
Guidelines* Comprehensi
categories  Comprehensi fully fledged
 Comprehensi ve
ve analysis
ve analysis
In line with EBAanalysis
SREP Guidelines

* SSM proxies implement the concept of supervisory benchmarks set out in the EBA Guidelines on SREP (§ 335)

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3.4.1. SREP - Methodology: Element 3 Block ECB-PUBLIC

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1
Risks to Capital - Block 1

RL
final
score

Phase 1 Phase 2 Phase 3 RC

Risk
contro Informatio Formal RC main final
l
n compliance assessmen score
gathering checking t

Deep-dive into a given risk factor: credit risk

(example)
Phase 1 Phase 2 Phase 3
 Risk Level:  Risk Level:  Risk Level:
• Sub-set of pre-defined • Automated score given • Comprehensive analysis, e.g.:
indicators calculated from through different • Current risk position and
ITS and STE data dimensions, such as: trend
• Quality (e.g. non • Forward looking view
performing loans ratio) • Peer comparison
 Risk Control: • Coverage (e.g. • In-depth analysis of various sub-
• Information provisions) categories, e.g.:
gathering • Non-financial
 Risk Control: corporate portfolios
• Compliance checks or
• Household portfolios
relating to internal  Risk Control:
governance, risk appetite, • Deeper analysis, notably
risk management and
thanks to dedicated meetings
internal audit of credit risk
with the bank
in particular
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Risks to Capital - Block 2

 ICAAP reliability assessment

 Following ECB ICAAP

expectations published on
08.01.2016, JSTs:
ECB ICAAP expectations
• assess reliability of the
• Content as described in EBA draft
whole process - qualitative
Guidelines to be delivered by end of
assessment
April 2016 with reference date end
• challenge ICAAP figures with 31.12.2015
SSM proxies - quantitative • Internal documentation together
assessment with a “readers manual”
• Risk data template
• come up with block 2
• Reconciliation between Pillar 1 and
assessment to feed the overall
ICAAP figures
capital adequacy assessment
• Conclusions in form of capital
adequacy statements supported by
analysis of ICAAP outcomes and
signed by management body

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3.4.3. SREP - Methodology: Element 3 Block 2 (2/3) ECB-PUBLIC

ICAAP - Qualitative assessment

Governanc
e
Capital
plannin
ICAAP Readers g design
Scenario
& generation
’
Docu- manua
mentatio Internal controls,
l independent reviews
n and documentation

Data, infrastructure,
risk capture,
measurement &
aggregation

Bank-internal Mapped to EBA JST

documents as GL structure to assessment
set out in EBA facilitate JST
GL access to bank-  ICAAP reliable? (yes/no)
internal
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3.4.4. SREP - Methodology: Element 3 Block 2 (3/3) ECB-PUBLIC

ICAAP - Quantitative assessment

ICAAP risk data Proxies* Assessment

Risk definition and • Give rough Internal capital

ICAAP estimates quantification of adjusted figure
according to banks capital demand (capital
own risk taxonomy requirements)
• Allow JST to put • Pillar 1 as floor
institution’s estimates
• No inter-risk
in perspective and
underpin supervisory
Dialo diversificati
dialogue
on
• Do not provide a gue with
single risk figure, but Banks
indicative ranges for
JSTs to derive risk-by-
risk capital figures
based on their
judgement
* Concentration risk (single
18 name
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3.4.5. SREP - Methodology: Element 3 Block ECB-PUBLIC

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3
Risks to Capital - Block 3
 Forward-looking perspective
 In 2016, two large-scale stress test exercises
currently under preparation

Characteristics EBA EU-wide Stress Test SREP Stress Test

Scop • 38 SSM SIs • Remaining SIs*

e * Exceptions may apply - preparation work in progress

• Launch of the exercise:

end of February 2016 •
Timelin • Broadly aligned with the EBA Stress
Publication: beginning of
e Test
Q3 2016

The results of both exercises will feed into the SREP

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3.4.6. SREP - Methodology: Element 3 - Capital adequacy ECB-PUBLIC

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Multiple perspectives on risk for capital adequacy

 After the JST has assessed 3 Blocks - 3 Perspectives to assess capital adequacy
the three blocks, it
obtains a view on the
institution’s capital needs
from three complementary
Block 1 Block 2 Block 3
 It can compare these capital
angles. Supervisory Bank’s Forward-looking
needs with the quantity perspective perspective perspecti
ve
and quality of capital that
the institution holds and
plans to raise in future.

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Risks to Liquidity

Three different perspectives (“3 Blocks”)

Block 1 Block 2 Block 3

Supervisory Bank’s Forward-looking
perspective perspective perspective

Short term liquidity,  Information  Information

funding gathering: e.g. gathering: bank
sustainability
 Information ILAAP reports internal Stress
For SREP 2015
Tests  Strongest weight
gathering  Anchoring  Anchoring
 Anchoring scores on Block 1
assessment: assessment:
on short-term challenge the supervisory Stress  Block 2 not yet
liquidity and institution’s Tests fully fledged
funding internal
 Assessment of  Block 3 not yet
sustainability risks estimates
 Comprehensive  Comprehensive supervisory Stress fully fledged
analysis analysis: e.g. of Tests results and of
ILAAP reliability bank’s internal
Stress Tests
In line with EBA SREP Guidelines, § 370-373

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3.5.1. SREP - Methodology: Element 4 Block ECB-PUBLIC

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1
Risks to Liquidity - Block 1

RL
final
score

Phase 1 Phase 2 Phase 3 RC

Risk
contro Informatio Formal RC main final
l
n compliance assessmen score
gathering checking t

Deep-dive into a given risk factor: Short term liquidity

(example)
Phase 1 Phase 2 Phase 3
 Risk Level:  Risk Level:  Risk Level:
• Sub-set of pre-defined • Automated score given • Deeper analysis:
indicators based on ITS and through several indicators • short term wholesale
STE data such as: funding risk
• Liquidity Coverage • intraday risk
 Risk Control: Ratio • quality of liquidity buffers
• Information gathering • short-term funding / • structural funding
total funding mismatch

 Risk Control:  Risk Control:

• Compliance checks • Deeper analysis, notably
relating to internal thanks to dedicated
governance, risk appetite, meetings with the bank
risk management and
internal audit

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3.5.2. SREP - Methodology: Element 4 Block 2 and 3 (1/2) ECB-PUBLIC

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Risks to Liquidity - Block 2 and 3

 ILAAP reliability assessment

 Following ECB ILAAP expectations

published on 08.01.2016, JSTs
• assess reliability of the whole
process - qualitative assessment
• challenge ILAAP needs and stress
test assumptions with SSM
ECB ILAAP expectations
proxies - quantitative assessment
• come up with block 2 and 3 • Content as described in EBA
assessment to feed the overall draft Guidelines by end of
April 2016 with reference date
ECB liquidity
assessme adequacy
Banking Supervision: SSM priorities 2016 (extract)
• end of the previous
Internal year
documentation with a
nt
Liquidity together “readers manual”
The 2015 Supervisory Review and Evaluation Process
revealed that a number of banks do not yet fully meet • Self-assessment
supervisory expectations regarding the sound management
of liquidity risks. The SSM will therefore focus on the • Conclusions in form of liquidity
reliability of banks’ Internal Liquidity Adequacy Assessment adequacy statements
Processes (ILAAP). Banks’ progress in implementing and
supported by analysis of ILAAP
maintaining sound frameworks for managing liquidity and
funding risk, both in a going concern situation and outcomes and signed by
under stressed circumstances, will be scrutinised. management body
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3.5.2. SREP - Methodology: Element 4 Block 2 and 3 (2/2) ECB-PUBLIC

ILAAP - Qualitative assessment

Governance
Funding
strategy
ILAAP Readers and
’ planning
Docu- manua Liquidity risk
measurement
mentatio l and monitoring
n Internal controls,
independent reviews
and documentation

Data, infrastructure,
risk capture,
measurement &
Bank-internal Mapped to EBA aggregation

documents as GL structure to JST

set out in EBA facilitate JST assessment
GL access to bank-
internal  ILAAP reliable? (yes/no)
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 3.6. SREP - Methodology: Overall assessment ECB-PUBLIC

The overall SREP assessment (holistic view)

 Provides synthetic overview of an

institution’s risk profile:
• Based on the assessment of all four elements
(not the simple sum)
• As a starting point the four SREP elements In line with the EBA SREP Guidelines
are considered equally important (table 13, pp. 170 and 171), the overall
SREP score reflects the supervisor’s
 Takes into overall assessment of the viability of the
institution: higher scores reflect an
•account:
the institution’s capital/liquidity planning to increased risk to the viability of the
ensure a sound trajectory towards the full institution stemming from one or several
implementation of CRD IV/CRR, features of its risk profile, including its
• peer comparisons, business model, its internal governance
framework, and individual risks to its
• the macro environment under which the solvency or liquidity position
institution operates.

An institution’s risk profile is necessarily multi-faceted, and many risk factors are
inter-related

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3.7. SREP - Methodology: Horizontal analyses ECB-PUBLIC

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Consistent and fair treatment

 High Number of horizontal analyses

performed when preparing
assessments and decisions in
order to provide:
• Additional perspectives to JSTs
• Support towards policy discussions
and the decision making process

Extensive peer comparisons and transversal analyses were possible on a wide

scale for the first time, allowing all institutions to be assessed in a
consistent manner and thus promoting a more integrated single banking market.

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3.8. SREP - Methodology: SREP decision (1/4) ECB-PUBLIC

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The overall SREP is the basis for assessing capital and
liquidity adequacy and for taking any necessary
supervisory measures to address concerns
 SREP decisions by the Supervisory Board
(followed by Governing Council non-objection
procedure)

 SREP decisions may include:

• Additional own fund requirements
o In 2015 expressed as a CET1 ratio add-on (in excess
of the minimum CET1 ratio)
o Recommendation to follow a linear path towards
“fully loaded” ratios
• Institution-specific quantitative liquidity
requirements
o LCR higher than the regulatory minimum
o Higher survival periods
o National measures

• Other, qualitative supervisory measures

o Additional supervisory measures stemming from Article
16(2) of the SSM Regulation are e.g. the restriction
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SREP decision - Capital measures

CET 1 Capital Requirements

Early Warning Threshold MDA

restriction
trigger
applies

point
maximu

O-SII G-SII
m

SRB
Buffer Buffer
Focus on MDA* (in line with EBA
Countercyclical
Gross Buffer
Opinion of 18 December 2015)
SREP Capital Conservation
2015 Buffer

Net Pillar 2
 Stacking order: Pillar 1, Net Pillar 2,
buffers
Pillar 1 (min CET 1
requirements)
 In 2015 Pillar 2 requirements and
(phase-in) buffers in CET 1

* Maximum Distributable Amount:

Breaches of the combined buffer requirement (CBR) - defined as the sum of
 CET1 capital to be taken into account
the applicable buffers - lead to mandatory restrictions on distributions (e.g. for the MDA calculation is limited to
dividends, coupon payments on AT1 capital instruments, discretionary
bonuses). A bank which fails to meet its CBR will be automatically prohibited
the amount not used to meet the
from distributing more than the so called Maximum Distributable Amount Pillar 1 and 2 CET 1
(MDA). The MDA is the bank’s distributable profit multiplied by a factor requirements
ranging between 0.6 and 0 depending on how much CET1 capital is missing
to meet the CBR.

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SREP decision - Liquidity measures

Concerning the institution-specific supervisory

liquidity requirements for 2015:

 LCR requirements have come into force on

01.10.2015

 Liquidity assessment takes into account

qualitative and
• funding profile quantitative assessment,
including
• survivalmetrics Example of specific
period such as:
• liquid assets liquidity measures
• reliance on short-term wholesale funding  require an LCR
applicable higher than the
regulatory
minimum
 require a specific
minimum survival
period
 require a minimum
amount of liquid
assets
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3.8. SREP - Methodology: SREP decision (4/4) ECB-PUBLIC

SREP decision - Other supervisory measures

Article 16(2) of the SSM Regulation

The ECB has the following powers:

(a) to require institutions to hold own funds in excess of
the capital requirements;
(b) to require the reinforcement of the arrangements,
processes, mechanisms and strategies;
(c) to require institutions to present a plan to restore compliance with supervisory
requirements and set a deadline for its implementation, (…) ;
(d) to require institutions to apply a specific provisioning policy or treatment of assets in
terms of own funds requirements;
(e) to restrict or limit the business, operations or network of institutions or to request the
divestment of activities that pose excessive risks to the soundness of an
institution;
(f) to require the reduction of the risk inherent in the activities, products and systems of
institutions;
(g) to require institutions to limit variable remuneration (…) ;
(h) to require institutions to use net profits to strengthen own funds;
(i) to restrict or prohibit distributions to shareholders, members or holders of Additional Tier
1 instruments where the prohibition does not constitute an event of default of the
institution;
(j) to impose additional or more frequent reporting requirements (…) ;
(k) to impose specific liquidity requirements, including restrictions on maturity mismatches
between assets and liabilities;
(l) to require
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(m) to remove at any time members from the management body of creditu©institutions
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3.9. SREP - Methodology: SREP communication ECB-PUBLIC

Public information:
 Published “Guide to
banking supervision”
Public  Publication of ECB
information stances
(e.g. on MDA,
remuneration, etc.)
 Speeches by Supervisory
Board Chair and Vice-
Horizontal Chair
dialogue
 LettersOngoing
to MEPs,dialogue with
hearings
and banks: exchange of
Horizontal dialogue with the Ongoing views  with MEPs
industry: dialogue with Supervisory
banks Examination
 Regular meetings
Programme
between Banking
 Meetings between
associations and DG
MS IV banks and JSTs
(especially ahead of
 Workshops with all
SREP decision)
Significant
 SREP decisions (right to
Institutions
Banks have be heard)
 the necessary clarity to understand the methodology, the risk assessment
and to take the measures to improve,
 the necessary certainty to perform their capital planning.
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4.1. SREP - Outcome: Key risks ECB-PUBLIC

 Overall level of risks in 2015 for Significant Institutions has not decreased
compared to 2014
 The banking system’s capital needs to be maintained, and in some cases,
strengthened
 Overall capital requirements increased by 50 basis points (bps) from 2015 to 2016
 Many banks are still recovering from the 2012 financial crisis, and they continue to face
risks and headwinds. In this context, compared to 2015, the average Pillar 2 requirements
Key risks for
increased by Significant
30 bps. Institutions SREP 2015 results by Overall score
 Phasing-in systemic buffers explain the second part of the capital requirements increase (20
Adaptation Average SREP CET 1 impact** (2015 vs.
bps). of banks’ business model in a 2014)
low interest rate environment spotted as
main concern

Adaption of Business
Model/low interest rate

Cybercrime/IT risk
Credit risk/Non-performing
Loans
Average CET 1 requirements
Governance/ conduct

Euro area crisis

risks
Reversal of
2015
search for
Emerging Markets/ yield
geopolotical risks
Future capital
requirements

* very few banks in this bucket lead to high volatility

** excluding Systemic Risk Buffers
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4.2. SREP - Outcome: CET 1 level (1/2) ECB-PUBLIC

Most Significant Institutions have currently capital levels

above CET1 requirements and buffers

CET 1 ratio requirements (2016 Banks with CET1 supply above CET 1 requirements and early warning threshold
phase-in) ratio
= Pillar 1 + Pillar 2 + Buffers
(without early warning threshold of Banks with CET1 supply above CET 1 requirements but below early warning
25 bp) threshold of 25bp Banks with CET 1 supply below CET 1 requirements

Note: CET1 supply level capped for readability purposes

Supervisory Review and Evaluation 33 www.bankingsupervision.europa.e

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 4.2. SREP - Outcome: CET 1 level (2/2) ECB-PUBLIC

 Average of SREP CET 1

requirements* of
Significant
Institutions is around
9.9%

 Median of SREP CET 1

requirements* of
Significant
Institutions is around
9.7%

 Harmonization of SREP CET 1

requirements achieved as
part of the SREP 2015 with
more systemic
* excluding consistent
risk buffers and risk-
sensitive Pillar 2 CET 1
requirements

Supervisory Review and Evaluation 34 www.bankingsupervision.europa.e

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4.3. SREP - Capital Planning ECB-PUBLIC

All things being equal, the Pillar 2 requirements set out in the SREP 2015
decisions also provide an indication for the future; especially the capital
conservation buffer will phase-in by 2019 with the Pillar 2 net requirement
reducing in equal fashion.
Subject to possible
changes by
Systemi Macroprudential authorities
Systemi
Systemi c
c
Systemic c buffers
buffers SREP Decision
B. Cons.
Cap. buffers Capital
Conservatio
Capital Capital
B. Conservatio
n Buffer Conservatio
n Buffer
n Buffer
SREP
add- SREP
add- SREP
on add- SREP Scope for SREP performed by
on add- SREP
on add- ECB
Banking Supervision. Subject
on to
change depending on factors
on
s that the SREP
influenc
(business model, governance,
e profile, outcome
risk capital structure,
ICAAP,
quality stress
of testing, funding
Pillar Pillar Pillar Pillar Pillar and liquidity profile …).
1 1 1 1 1
min. min. min. min. min. All other things being equal, the
SREP ratio in the capital
decision can expected to
remain broadly stable over the
2015 2016 2017 201 phase-in period.
2018 9
Excludes Countercyclical Buffer and reduces the three different systemic buffers to one
for simplicity

Supervisory Review and Evaluation 35 www.bankingsupervision.europa.e

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 5. SREP - Where do we stand? ECB-PUBLIC

First SREP cycle could be performed efficiently and promoted a level-playing

field

 Significant harmonization
• Constrained judgment effectively used
• Stronger correlation between risk
profile of institutions and capital
requirements

 In 2016, the SREP methodology will be refined

Before SREP SREP
on certain aspects, e.g. 4 Nov 2014 2014 2015
• Liquidity and funding risk assessment
• More harmonized framework for the
assessment of ICAAP
• 2016 stress tests under preparation

 Going forward, the SREP methodology will continue to evolve so as to adequately

monitor banking activities and risks in a forward looking manner

Supervisory Review and Evaluation 36 www.bankingsupervision.europa.e

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