+Guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP) (EBA/GL/2022/09)
---+Title 1 General provisions
------+1.1 Compliance and reporting obligations
---------+Status of these guidelines
------------+1. This document contains guidelines issued pursuant to Article 16 of Regulation (EU) No 1093/2010 …
------------+2. Guidelines set the EBA and ESMA view of appropriate supervisory practices within the European …
---------+Reporting requirements
------------+3. According to Article 16(3) of Regulation (EU) No 1093/2010, competent authorities must notify …
------------+4. Notifications will be published on the EBA website, in line with Article 16(3).
------+1.2 Subject matter, scope and definitions
---------+Subject matter
------------+5. These guidelines specify the common procedures and methodologies for the functioning of the …
---------+Scope of application
------------+6. These guidelines apply in relation to the supervisory review and evaluation process (SREP) of …
------------+7. Competent authorities should apply these guidelines at the highest level of consolidation in …
------------+8. Where an investment firm has a subsidiary in the same Member State a proportionate approach for …
------------+9. For investment firm groups, including groups with undertakings established in third countries …
---------+Addressees
------------+10. These guidelines are addressed to competent authorities as defined in Article 4(2), point …
---------+Definitions
------------+11. Unless otherwise specified, terms used and defined in Regulation (EU) 2019/2033 , Directive …
------+1.3 Implementation
---------+Date of application
------------+12. These guidelines apply from 19.06.2023.
------------+13. These guidelines are immediately applicable to the SREP exercises initiated in 2023.
---+Title 2 The common SREP
------+2.1 Overview of the common SREP framework
---------+14. Competent authorities should ensure that the SREP of an investment firm covers the following …
---------+15. Competent authorities should categorise each investment firm for which the supervisory review …
---------+16. The categorisation should be used by competent authorities as a basis for applying the …
---------+17. Among categories 1 to 3, competent authorities may categorise an investment firm on a …
---------+18. Competent authorities should base the categorisation on supervisory reporting data and on …
---------+19. Competent authorities should continuously assess the risks to which the investment firm is or …
---------+20. The assessments should be conducted in accordance with the proportionality criteria specified …
---------+21. Competent authorities should ensure that the outcomes of the assessments outlined above: a. are …
---------+22. Competent authorities should periodically review the adequacy of the investment firm’s own …
---------+23. Competent authorities should perform periodic assessments taking into account the minimum …
---------+24. Competent authorities should ensure that the outcomes of the assessments: a. are clearly …
---------+25. Competent authorities should continuously assess the risk profile of the investment firm and …
---------+26. The assessment should be continuously reviewed in light of findings from the risk assessments …
---------+27. Competent authorities should ensure that the outcomes of the assessment: a. are reflected in …
---------+28. Following the minimum engagement model, as specified in Section 2.4, competent authorities …
---------+29. Based on the overall SREP assessment and building on assessments of the individual SREP …
---------+30. Where findings from the monitoring of key indicators, assessment of SREP elements or any other …
---------+31. As outlined in Section 2.4, competent authorities should also engage in dialogue based on the …
------+2.2 Scoring in the SREP
---------+32. Competent authorities should assign risk and viability scores to summarise the outcomes of the …
---------+33. In the assessment of the individual risk categories and SREP elements, competent authorities …
---------+34. In their implementation of the guidelines, competent authorities may introduce more granular …
---------+35. Competent authorities should ensure that all scores are regularly reviewed, at least with the …
---------+36. Competent authorities should assign risk scores to individual risks to capital in accordance …
---------+37. Competent authorities should determine the risk score predominantly through an assessment of …
---------+38. In implementing these guidelines, competent authorities may evaluate inherent risk levels and …
---------+39. Competent authorities should separately assign scores to summarise the level of risk posed to …
---------+40. For capital adequacy and liquidity adequacy, these scores represent the supervisory view of the …
---------+41. Competent authorities should also assign an overall SREP score in accordance with the criteria …
---------+42. Competent authorities should ensure that the scoring of the business model, internal governance …
---------+43. Competent authorities should ensure that the overall SREP score assigned based on the aggregate …
---------+44. When the outcome of the overall SREP assessment suggests that an investment firm can be …
------+2.3 Organisational arrangements
---------+45. Competent authorities should ensure that, for conducting the SREP, their organisational …
---------+46. When defining arrangements for dialogue with investment firms, competent authorities should …
------+2.4 Proportionality and supervisory engagement
---------+47. Competent authorities should apply the principle of proportionality in the scope, frequency and …
---------+48. For the frequency of the supervisory engagement aspect of proportionality, when planning SREP …
---------+49. Where competent authorities determine that investment firms have similar risk profiles, they …
---------+50. For investment firms with an overall SREP score 4 and, where necessary, for investment firms …
---------+51. Regardless of the time since the last SREP, competent authorities should perform a new …
---------+52. When planning SREP activities, competent authorities should pay special attention to …
---------+53. For the scope of proportionality, when conducting the SREP by applying these guidelines …
---------+54. At the end of every assessment of all SREP elements, competent authorities may inform the …
---------+55. In order to ensure appropriate frequency of supervisory activities related to SREP for category …
---------+56. In order to ensure appropriate frequency of supervisory activities related to SREP for category …
---------+57. In order to ensure appropriate frequency of supervisory activities related to SREP for category …
---------+58. For small and non-interconnected investment firms meeting the criteria of Article 12(1) of …
---+Title 3 Monitoring of key indicators
------+59. Competent authorities should engage in regular monitoring of key financial and non-financial …
------+60. Competent authorities should monitor key financial indicators in alignment with the frequency …
------+61. Competent authorities should establish monitoring systems and patterns allowing for the …
------+62. Competent authorities should tailor the set of indicators and their thresholds to the specific …
------+63. Competent authorities should identify the indicators to be tracked through regular monitoring …
------+64. The framework of indicators established and the outcomes of the monitoring of key indicators …
------+65. Indicators used for monitoring should include at least the following firm-specific indicators …
------+66. Competent authorities should include non-financial indicators such as, for example, the scope …
------+67. Competent authorities should accompany firm-specific indicators with relevant macro-economic …
------+68. Competent authorities should also consider supplementing the regular monitoring of key …
---+Title 4 Business model analysis
------+4.1 General considerations
---------+69. This title specifies the criteria for the assessment of the business model and strategy of the …
---------+70. Without undermining the responsibility of the investment firm’s management body for running and …
---------+71. Competent authorities should use the outcome of the BMA to support the assessment of all other …
---------+72. Competent authorities should also use the BMA to support the identification of the investment …
---------+73. In addition, competent authorities should use the BMA to assess prudential implications of …
---------+74. Competent authorities should undertake the following steps as part of the BMA in a …
---------+75. For category 3 investment firms, where the scale and complexity of an investment firm’s …
---------+76. To conduct the BMA, competent authorities may use the following sources of quantitative and …
------+4.2 Preliminary assessment
---------+77. Competent authorities should analyse the investment firm’s main activities, geographies and …
---------+78. For this purpose, competent authorities should consider a range of relevant metrics at the …
---------+79. Competent authorities should use this preliminary assessment to: a. determine the materiality …
------+4.3 Identifying the areas of focus for the BMA
---------+80. Competent authorities should determine the focus of the BMA. They should focus on the business …
------+4.4 Assessing the business environment
---------+81. To form a view on the plausibility of an investment firm’s strategic assumptions, competent …
------+4.5 Analysis of the current business model
---------+82. To understand the means and methods used by an investment firm to operate and generate profits …
---------+83. Competent authorities should undertake both a static and trend analysis of key quantitative …
---------+84. Areas for analysis by competent authorities may include: a. profit and loss: competent …
---------+85. Competent authorities should undertake an analysis of qualitative features of the investment …
---------+86. Areas for analysis by competent authorities may include: a. key external dependencies …
------+4.6 Analysis of the strategy
---------+87. Competent authorities should undertake a quantitative and qualitative forward-looking analysis …
---------+88. Areas for analysis by competent authorities may include: a. overall strategy: competent …
------+4.7 Assessing business model viability
---------+89. Having conducted the analyses covered in Sections 4.4 and 4.5, competent authorities should …
---------+90. Competent authorities may assess the level of returns against the following criteria: a. return …
------+4.8 Assessing the sustainability of the investment firm’s strategy
---------+91. Having conducted the analyses covered in Sections 4.4 to 4.6, competent authorities should …
---------+92. In particular, competent authorities may assess the sustainability of the investment firm’s …
---------+93. For non-complex investment firms and where financial projections are not available or not …
------+4.9 Identification of key vulnerabilities
---------+94. Having conducted the BMA, competent authorities should assess the key vulnerabilities to which …
---------+95. Following the above assessment, competent authorities should form a view on the viability of …
------+4.10 Summary of findings and scoring
---------+96. Based on the assessment of the viability and sustainability of the business model, competent …
---------+Score Supervisory view Considerations
---+Title 5 Assessing internal governance and investment firm-wide controls
------+5.1 General considerations
---------+97. Competent authorities should assess whether or not an investment firm’s internal governance …
---------+98. For SREP, the assessment of the investment firm’s internal governance and controls should …
---------+99. The assessment of internal governance should inform the specific assessment of risk management …
---------+100. In line with the EBA Guidelines on internal governance , the assessment of the internal …
---------+101. To ensure a consistent investor protection across the financial services, competent …
---------+102. Competent authorities should have regard to the principle of proportionality with a view to …
---------+103. For the purpose of the above paragraph and having regard to the variety of different business …
---------+104. Criteria to be taken into account for the application of the principle of proportionality such …
---------+105. For the appropriate application of the SREP in the case of investment firms classified, in …
---------+106. For investment firms which meet the conditions for qualifying as small and non-interconnected …
------+5.2 Overall internal governance framework
---------+107. Competent authorities should assess whether the investment firm establishes robust internal …
---------+108. Competent authorities should assess whether the investment firm’s overall governance framework …
---------+109. For the purpose of proportionality and where category 3 investment firms are concerned …
------+5.3 Organisation and functioning of the management body
---------+110. In accordance with Articles 26 and 28 of Directive (EU) 2019/2034, the EBA Guidelines on …
---------+111. For the purpose of proportionality and where category 3 investment firms are concerned …
------+5.4 Remuneration policies and practices
---------+112. Competent authorities should assess whether the investment firm has remuneration policies and …
---------+113. Competent authorities should assess at least whether: a. the remuneration policy for all staff …
---------+114. When applying the principle of proportionality, competent authorities should consider the …
------+5.5 Internal control framework and functions
---------+115. Competent authorities should assess whether the investment firm has an internal control …
---------+116. Competent authorities should assess whether the investment firm has an effective and permanent …
---------+117. Competent authorities should assess whether the investment firm’s compliance function, and …
------+5.6 Risk management framework
---------+118. Competent authorities should assess whether the investment firm has established an appropriate …
---------+119. When assessing the risk management framework, competent authorities should consider the extent …
---------+120. When reviewing the risk strategy, risk appetite and risk management framework of an investment …
---------+121. Competent authorities should assess whether investment firms, which are not small and …
---------+122. In the case of investment firms which meet the conditions for qualifying as small and …
---------+123. These assessments should contribute to the determination of additional own funds requirement …
---------+124. When assessing the soundness of the ICARAP, competent authorities should assess, where …
---------+125. When assessing the effectiveness of the ICARAP, competent authorities should assess, where …
---------+126. Competent authorities should assess the appropriateness of the ICARAP’s coverage of the …
---------+127. Competent authorities should assess whether the investment firms perform a comprehensive …
---------+128. Competent authorities should assess whether investment firms performing activities referred to …
---------+129. Competent authorities should review investment firms’ assessments of cyclical economic …
---------+130. For investment firms performing activities referred to in point (3) or (6) of Section A of …
---------+131. When assessing stress tests and sensitivity analyses and their results in the case of …
---------+132. If competent authorities identify deficiencies in the design of the assessment of cyclical …
------+5.7 ML/TF risks and prudential concerns
---------+133. When analysing the internal governance framework and investment firm-wide controls, competent …
---------+134. Competent authorities should assess whether the investment firm’s overall governance framework …
---------+135. In line with the EBA Guidelines on internal governance and Joint ESMA and EBA Guidelines on …
---------+136. For the purpose of proportionality, where lower ML/TF risk is justified by the types of …
------+5.8 Information and communication technologies
---------+137. Competent authorities should assess whether the investment firm has sound, effective and …
---------+138. In particular, competent authorities should assess whether the investment firm is able to …
---------+139. Competent authorities should assess whether the information systems effectively support the …
------+5.9 Business contingency and continuity planning
---------+140. Competent authorities should assess whether the investment firm has established an effective …
---------+141. Competent authorities should assess whether an investment firm: a. has put in place and tested …
------+5.10 Application at the consolidated level and implications for group entities
---------+142. At the consolidated level, in addition to the elements covered in the sections above …
---------+143. When conducting the assessment of internal governance and investment firm-wide controls at …
------+5.11 Summary of findings and scoring
---------+144. Following the above assessments, competent authorities should form a view on the adequacy of …
---------+Score Supervisory view Considerations
---+Title 6 Assessing risks to capital
------+6.1 General considerations
---------+145. Competent authorities should assess and score the risks to capital that have been identified …
---------+146. The purpose of this title is to provide common methodologies to be considered for assessing …
---------+147. This title provides competent authorities with guidance for the assessment of risks and costs …
---------+148. Paragraph 147, points (a) to (c) are applicable to the assessment of investment firms …
---------+149. The title also identifies a set of sub-categories within each risk category above, which need …
---------+150. The decision on materiality is based on the most recent available data and can be complemented …
---------+151. Competent authorities should also assess other risks that are identified as material to a …
---------+152. The above elements should also be taken into account by competent authorities when they are …
---------+153. For Risk-to-Client, Risk-to-Market, Risk-to-Firm, as well as for fixed overheads requirement …
---------+154. In their implementation of the methodologies specified in this title, competent authorities …
---------+155. When performing their assessments, competent authorities should use all available information …
---------+156. For each risk category, competent authorities should assess and reflect in the risk score: a. …
---------+157. Competent authorities should reflect the outcome of the assessment of each risk category in a …
------+6.2 Assessment of orderly wind-down of the investment firm
---------+158. Competent authorities should identify and assess the process to orderly wind-down the …
---------+159. There are many scenarios under which an investment firm may wind-down. While performing their …
---------+160. To set up adequate scenarios pursuant to paragraph 159, competent authorities should consider …
---------+161. Where a recovery plan is available, if appropriate, competent authorities should rely on the …
---------+162. Competent authorities should determine the adequate time horizon for the investment firm to …
---------+163. To determine the expected time-horizon of orderly wind-down, competent authorities should take …
---------+164. Competent authorities should determine the various stakeholders that could be impacted by the …
---------+165. Competent authorities should perform an assessment of the impact of a wind-down on the …
---------+166. Competent authorities should perform an assessment of the impact of a wind-down on the markets …
---------+167. Based on the analysis of the investment firm’s organisational structure and operating model …
------+6.3 Assessment of Risk-to-Client
---------+168. Competent authorities should assess Risk-to-Client arising from all types of exposures …
---------+169. In assessing Risk-to-Client, competent authorities should take into account the different …
---------+170. Through the assessment of inherent Risk-to-Client, competent authorities should determine the …
---------+171. Competent authorities should assess Risk-to-Client in both current and prospective terms.
---------+172. Where relevant, competent authorities should also conduct a more granular assessment …
---------+173. To determine the scope of the assessment of Risk-to-Client, competent authorities should first …
---------+174. As a minimum, competent authorities should consider the following: a. the risk appetite with …
---------+175. Competent authorities should perform the preliminary analysis considering the change in the …
---------+176. Competent authorities should assess the risk of incurring a loss for clients due to the …
---------+177. Competent authorities should focus on these sources of inherent risk, where relevant: a. …
---------+178. Competent authorities should assess the risk of losing client money and having to compensate …
---------+179. Competent authorities should assess whether client money is held according to national law …
---------+180. Competent authorities should focus on these sources of inherent risk, where relevant: a. …
---------+181. Competent authorities should assess the risk of incurring a loss for clients and having to …
---------+182. Competent authorities should focus on these sources of inherent risk where relevant: a. reuse …
---------+183. Competent authorities should assess the risk of operational loss while handling client orders. …
---------+184. Competent authorities should focus on these sources of inherent risk, where relevant: a. …
---------+185. To achieve a comprehensive understanding of the investment firm’s Risk-to-Client profile …
---------+186. Following the above assessment, competent authorities should form a view on the investment …
------+6.4 Assessment of Risk-to-Market
---------+187. Competent authorities should assess Risk-to-Market arising from all types of exposures: for …
---------+188. In assessing Risk-to-Market, competent authorities should take into account the volume, nature …
---------+189. Through the assessment of inherent market risk, competent authorities should determine the …
---------+190. To determine the scope of the assessment of risk-to-market, competent authorities should first …
---------+191. As a minimum, competent authorities should consider: a. the investment firm’s market …
---------+192. In their initial assessments, competent authorities should also consider significant changes …
---------+193. Competent authorities should analyse the nature of the investment firm’s market risk exposures …
---------+194. Competent authorities should analyse market risk exposures by relevant asset classes and/or …
---------+195. While analysing market risk activities, competent authorities should also consider the …
---------+196. Where appropriate, competent authorities should assess distressed and/or illiquid positions …
---------+197. For those investment firms using internal approaches to calculate their regulatory own funds …
---------+198. Where appropriate, competent authorities should also consider the internal risk measures of …
---------+199. When analysing inherent market risk, competent authorities should consider ‘point-in-time’ …
---------+200. Competent authorities should analyse the historic profitability, including volatility of …
---------+201. While assessing profitability, competent authorities should pay specific attention to the main …
---------+202. For those asset classes and/or exposures generating abnormal profits or losses, competent …
---------+203. Competent authorities should form a view on the degree of market concentration risk to which …
---------+204. When evaluating possible concentrations, competent authorities should pay special attention to …
---------+205. Competent authorities should form a view on the prudent valuation framework of the investment …
---------+206. Competent authorities should assess whether the investment firm’s trading book positions are …
---------+207. Competent authorities should assess whether investment firms have robust prudent valuation …
---------+208. Competent authorities should assess whether: a. the governance arrangements, processes and …
---------+209. Competent authorities should assess the risk relating to the underestimation of own funds …
---------+210. To achieve a comprehensive understanding of the investment firm’s market risk profile …
---------+211. Following the above assessment, competent authorities should form a view on the investment …
---------+212. Competent authorities should consider all these factors in parallel and not in isolation and …
------+6.5 Assessment of Risk-to-Firm
---------+213. Competent authorities should assess Risk-to-Firm arising from different risk factors such as …
---------+214. In assessing Risk-to-Firm, competent authorities should take into account the volume, nature …
---------+215. Through the assessment of inherent Risk-to-Firm, competent authorities should determine the …
---------+216. Competent authorities should assess Risk-to-Firm in both current and prospective terms.
---------+217. Where relevant, competent authorities should also conduct a more granular assessment …
---------+218. To determine the scope of the assessment of Risk-to-Firm, competent authorities should first …
---------+219. As a minimum, competent authorities should consider the following: a. the business model and …
---------+220. Competent authorities should perform the preliminary analysis considering the change in the …
---------+221. Competent authorities should form a view on the degree of operational risk related to trading …
---------+222. Competent authorities should focus on these sources of inherent risk, where relevant: a. …
---------+223. Competent authorities should form a view on the degree of concentration risk to which the …
---------+224. Competent authorities should conduct this assessment considering different categories of …
---------+225. Competent authorities should pay particular attention to hidden sources of concentration risk …
---------+226. For groups, competent authorities should consider the concentration risk that can result from …
---------+227. Competent authorities should assess the trading counterparty default risk faced by investment …
---------+228. For this assessment, competent authorities should focus on the following sources of inherent …
---------+229. Competent authorities should form a view on the risks incurred by the investment firm’s due to …
---------+230. Competent authorities should focus on assets whose value has been estimated through models and …
---------+231. Credit risk may arise from granting loans to allow a client to carry out a transaction, direct …
---------+232. Competent authorities should focus on these sources of inherent risk if the relevant data is …
---------+233. Competent authorities should form a view on the degree of risk of impairment or depreciation …
---------+234. Competent authorities should focus on these sources of inherent risk where relevant: a. …
---------+235. Competent authorities should form a view on the risks incurred by the investment firm’s due to …
---------+236. Competent authorities should focus on the nature of the financial instruments held by the …
---------+237. Competent authorities should form a view on the risks incurred by the investment firm’s …
---------+238. Competent authorities should focus on the risk resulting from a structural gap between assets …
---------+239. To achieve a comprehensive understanding of the investment firm’s Risk-to-Firm profile …
---------+240. Following the above assessment, competent authorities should form a view on the investment …
---------+241. Competent authorities should consider all these factors in parallel and not in isolation and …
------+6.6 Assessment of other risks
---------+242. Competent authorities should assess the importance of other risks to investment firm’s …
---------+243. Through the assessment of inherent risks not covered by Pillar 1 own funds requirements …
---------+244. Competent authorities should assess risks not covered by Pillar 1 own funds requirements in …
---------+245. Where relevant, competent authorities should also conduct an assessment of other risks than …
---------+246. To determine the scope of the assessment of risks not covered by Pillar 1 own funds …
---------+247. As a minimum, competent authorities should consider the following: a. the business model and …
---------+248. Competent authorities should perform the preliminary analysis considering the change in the …
---------+249. Competent authorities should assess the interest rate risk arising from non-trading book …
---------+250. Competent authorities should assess how changes in interest rates can have an adverse impact …
---------+251. In their quantitative assessment, competent authorities should consider the results of the …
---------+252. Competent authorities should assess operational risks not covered by minimum own funds …
---------+253. Competent authorities should consider the following sources of inherent risk and, where …
---------+254. As part of all SREP assessments, competent authorities should form a view on the degree of ICT …
---------+255. Competent authorities should form a view on the degree of conduct risk related to investment …
---------+256. Competent authorities should focus on the following sources of inherent conduct risk where …
---------+257. Competent authorities should form a view on regulatory, legal, and fiscal risks arising from …
---------+258. Competent authorities should focus on these sources of inherent regulatory, legal, and fiscal …
---------+259. Competent authorities should assess the risk relating to models used for business purposes …
---------+260. Having regard to the specificities of the investment firm, while performing the assessment of …
---------+261. Based on quantitative and qualitative criteria, competent authorities should form a view of …
---------+262. Where appropriate, the assessment of systemic risk may be performed in an aggregate manner for …
---------+263. To achieve a comprehensive understanding of the investment firm’s risk profile regarding risks …
---------+264. Following the above assessment, competent authorities should form a view on the investment …
---------+265. Competent authorities should consider all these factors in parallel and not in isolation and …
---+Title 7 SREP capital assessment
------+7.1 General considerations
---------+266. Competent authorities should determine through the SREP capital assessment whether the own …
---------+267. Competent authorities should do this by determining and setting the amount of additional own …
---------+268. To address potential capital inadequacies, including in adverse conditions, competent …
---------+269. When setting the additional own funds requirement and, where relevant, P2G, competent …
---------+270. Competent authorities should assess the adequacy of the investment firm’s own funds and the …
---------+271. Competent authorities should determine and set the additional own funds requirement and, where …
---------+272. Competent authorities may determine any additional own funds requirement for small and …
------+7.2 Determining additional own funds requirement
---------+273. Competent authorities should determine additional own funds requirement for material risks and …
---------+274. The total amount of additional own funds requirement should be the sum of any additional own …
---------+275. Competent authorities are required to set the level of additional own funds requirement to …
---------+276. Competent authorities should rely on the following sources of information for the …
---------+277. As referred in paragraph 276, point (a), the ICAAP and outcomes of its assessment should be …
---------+278. As referred to in paragraph 276, point (b), where appropriate, the recovery plan and its …
---------+279. Competent authorities should assess whether the ICAAP is covering both: a. the risks or …
---------+280. Competent authorities should assess the reliability of the ICAAP calculations related to …
---------+281. Competent authorities should further assess the reliability of the ICAAP calculations by …
---------+282. An ICAAP calculation should be considered partially reliable where, despite not meeting all …
---------+283. Competent authorities should develop and apply risk-specific supervisory benchmarks as a means …
---------+284. The supervisory benchmarks should be developed, taking into account the implementation burden …
---------+285. Given the variety of different business models operated by, size and complexity of investment …
---------+286. When competent authorities take supervisory benchmarks into consideration for the …
---------+287. Competent authorities should use other relevant inputs to support the determination of risk …
---------+288. Other relevant inputs should prompt competent authorities to reassess the …
---------+289. To ensure consistency in determining additional risk category-by-risk category or risk-by-risk …
---------+290. When competent authorities take other relevant inputs into consideration for the determination …
---------+291. If, during the ongoing review of internal approaches pursuant to the requirements of Article …
---------+292. If during their reviews pursuant to Article 36 of Directive (EU) 2019/2034, and following the …
---------+293. Competent authorities should set additional own funds to cover deficiencies in governance …
---------+294. Where an investment firm that does not meet the conditions for qualifying as small and …
------+7.3 Articulation and justification of own funds requirements
---------+295. In determining additional own funds requirement in accordance with Article 40 (3) of Directive …
---------+296. Competent authorities should ensure 𝐷𝐷 that the applicable additional own funds requirement …
---------+297. When communicating the prudential requirements to investment firms, competent authorities …
---------+298. In the justification of additional own funds requirement pursuant to paragraph 273, points (b) …
------+7.4 Meeting requirements under cyclical economic fluctuations
---------+299. For investment firms that do not meet the conditions for qualifying as small and …
---------+300. When considering adverse cyclical economic fluctuations, competent authorities should assess …
---------+301. To assess capital adequacy in case of adverse cyclical economic fluctuations, competent …
---------+302. Based on the assessment pursuant to paragraph 301, competent authorities should determine …
---------+303. Competent authorities should determine P2G as specified in this section, and at a time …
---------+304. P2G is the amount of capital considered adequate that should be set to allow for cyclical …
---------+305. Competent authorities should determine and set P2G based on the outcomes of the assessment of …
---------+306. For the purpose of paragraph 305, competent authorities should ensure that the analyses …
---------+307. Competent authorities should generally not use P2G to cover aspects of risks that should be …
---------+308. When determining the size of P2G, competent authorities should ensure that it is set at a …
---------+309. When determining the size of P2G, competent authorities should consider, where relevant, the …
---------+310. Without prejudice to paragraph 271, competent authorities should timely review the level of …
---------+311. P2G set by competent authorities is additional to the highest component of own funds …
---------+312. Where P2G is set or updated, competent authorities should communicate to the investment firm …
---------+313. In case of a review in accordance with paragraph 310310, where supervisory reviews in …
---------+314. Competent authorities should communicate to investment firms that P2G is expected to be met …
---------+315. Competent authorities should also communicate to investment firms that own funds held for the …
---------+316. When setting and communicating to the investment firm time limits to establish P2G, competent …
---------+317. When the quantitative outcomes referred to in Section 7.4 indicate that, under the given …
---------+318. To determine the credibility of the capital plan, the competent authority should consider, as …
---------+319. When assessing capital plans, competent authorities should, where appropriate, following an …
---------+320. Competent authorities should expect investment firms to implement the revised capital plan …
---------+321. Competent authorities should, where relevant, consider the application of additional …
---------+322. In particular, where the quantitative outcomes of the stress tests or sensitivity analyses …
------+7.5 Summary of findings and scoring
---------+323. Following the above assessment, competent authorities should form a view on whether existing …
---------+Score Supervisory view Considerations
---+Title 8 Assessing risk to liquidity
------+8.1 General considerations
---------+324. Competent authorities should assess and score the risks to liquidity that have been identified …
---------+325. The formality and granularity of the assessment should depend on the investment firm’s size …
---------+326. Investment firms which deal on own account should conduct liquidity assessment, including …
---------+327. Competent authorities should verify the investment firm’s compliance with the minimum …
---------+328. In conducting the assessment of risk to liquidity, competent authorities should consider all …
---------+329. The assessment of liquidity risk should be based on reliable and up-to-date information, and …
---------+330. Competent authorities should reflect the outcome of the assessment of liquidity risk in a …
------+8.2 Assessing liquidity risk
---------+331. Competent authorities should evaluate the impact on liquid assets under severe, but plausible …
---------+332. Competent authorities should assess the amount of liquid assets needed to ensure that the …
---------+333. In evaluating the impact of severe, but plausible conditions on the investment firm’s …
---------+334. For investment firms that deal on own account, competent authorities should assess if the …
---------+335. Competent authorities should base their assessment on the investment firm’s analysis of …
---------+336. For the purposes of the intraday liquidity risk assessment, competent authorities should …
---------+337. For the assessment of liquidity needs under normal conditions and the evaluation of intraday …
---------+338. Competent authorities should assess the investment firm’s exposure to intraday liquidity risk …
---------+339. For investment firms which are market makers as defined in Article 2(1), point (k) of …
---------+340. Competent authorities should assess the adequacy of the liquidity resources of investment …
---------+341. Competent authorities should assess the ability of investment firms that are market makers to …
---------+342. When assessing the risk to liquidity competent authorities should assess the investment firm’s …
---------+343. Competent authorities should assess the appropriateness of the investment firm’s funding …
---------+344. Competent authorities should assess the diversity of funding sources. The assessment should …
---------+345. Competent authorities should assess whether potential shortcomings arising from the investment …
---------+346. Competent authorities should consider factors that may reduce the stability of the funding in …
---------+347. Competent authorities should assess risk to the sustainability of the investment firm’s …
------+8.3 Assessing liquidity risk management
---------+348. Competent authorities should assess the investment firm’s liquidity risk management framework. …
---------+349. Competent authorities should assess whether the investment firm has an effective liquidity …
---------+350. The framework should be proportional to the size, structure and internal organisation of the …
---------+351. Competent authorities should assess whether the investment firm’s risk management framework …
---------+352. Competent authorities should assess whether the investment firm’s strategies focus on ensuring …
---------+353. When assessing the framework, policies and procedures for liquidity risk management, competent …
---------+354. Competent authorities should assess whether the investment firm has an appropriate …
---------+355. Competent authorities should assess whether the investment firm has a strong and comprehensive …
------+8.4 Summary of findings and scoring
---------+356. Following the above assessment, competent authorities should form a view on the investment …
---+Title 9. Determination of the outcome of liquidity assessment
------+9.1 General considerations
---------+357. Competent authorities should use the assessment under Title 8 to identify and assess current …
---------+358. Competent authorities should conduct the SREP liquidity assessment process using the following …
------+9.2 Overall assessment of liquidity risk
---------+359. To assess whether the liquidity held by an investment firm provides appropriate coverage of …
---------+360. For the outcome of the assessment of liquidity risk, competent authorities should take into …
---------+361. When assessing the investment firm’s ILAAP framework, competent authorities should assess …
---------+362. Competent authorities should translate this overall assessment into a liquidity and funding …
------+9.3 Determining the need for specific liquidity requirements
---------+363. When competent authorities determine specific liquidity requirement in accordance with Article …
---------+364. To determine the quantitative requirement, competent authorities should require an amount of …
------+9.4 Summary of findings and scoring
---------+365. Following the above assessment, competent authorities should form a view on whether existing …
---------+Score Supervisory view Considerations
---+Title 10 Overall SREP assessment and application of supervisory measures
------+10.1 General considerations
---------+366. This title covers the combination of the findings of the assessments of the SREP elements into …
---------+367. Competent authorities should exercise their supervisory powers on the basis of deficiencies …
---------+368. When applying supervisory measures to address specific deficiencies identified in the …
---------+369. When applying supervisory measures or sanctions to address prudential deficiencies related to …
---------+370. Competent authorities may take immediate supervisory measures directly linked to the outcomes …
------+10.2 Overall SREP assessment
---------+371. In determining the overall SREP assessment, competent authorities should consider the findings …
---------+372. On the basis of these considerations, competent authorities should determine the investment …
---------+373. On the basis of this determination, competent authorities should: a. take any supervisory …
---------+374. The overall SREP assessment should be reflected in a viability score based on the …
---------+375. When determining that an investment firm is ‘failing or likely to fail’, as reflected by an …
------+10.3 Application of capital measures
---------+376. Competent authorities should impose additional own funds requirement and establish own funds …
---------+377. Notwithstanding the requirements referred to in the previous paragraph, competent authorities …
---------+378. If after liaising with the AML/CFT supervisor, there is a need for competent authorities to …
------+10.4 Application of liquidity measures
---------+379. Competent authorities should impose specific liquidity requirements in accordance with the …
---------+380. Notwithstanding the specific quantitative requirements referred to in the previous paragraph …
------+10.5 Application of other supervisory measures
---------+381. To address specific deficiencies identified in the assessment of SREP elements, competent …
---------+382. Supervisory measures to address deficiencies identified in the BMA are likely to involve …
---------+383. In accordance with Article 39(2), point (b) of Directive (EU) 2019/2034, competent authorities …
---------+384. In accordance with Article 39(2), point (e) of Directive (EU) 2019/2034, competent authorities …
---------+385. In accordance with Article 39(2), point (f) of Directive (EU) 2019/2034, competent authorities …
---------+386. Supervisory measures to address deficiencies identified in the assessment of internal …
---------+387. In accordance with Article 39(2), point (b) of Directive (EU) 2019/2034, competent authorities …
---------+388. In accordance with Article 39(2), point (g) of Directive (EU) 2019/2034, competent authorities …
---------+389. Based on the outcomes of the qualitative review of stress testing programmes and if …
---------+390. Supervisory measures to address deficiencies identified in the assessment of the …
---------+391. In accordance with Article 39(2), point (b) of Directive (EU) 2019/2034, competent authorities …
---------+392. In accordance with Article 39(2), point (d) of Directive (EU) 2019/2034, competent authorities …
---------+393. In accordance with Article 39(2), points (e) and (f) of Directive (EU) 2019/2034, competent …
---------+394. Supervisory measures to address deficiencies identified in the assessment of risk-to-market …
---------+395. In accordance with Article 39(2), point (b) of Directive (EU) 2019/2034, competent authorities …
---------+396. In accordance with Article 39(2), point (e) of Directive (EU) 2019/2034, competent authorities …
---------+397. In accordance with Article 39(2), point (f) of Directive (EU) 2019/2034, competent authorities …
---------+398. Supervisory measures to address deficiencies identified in the assessment of risk-to-firm and …
---------+399. In accordance with Article 39(2), point (b) of Directive (EU) 2019/2034, competent authorities …
---------+400. In accordance with Article 39(2), points (e) and (f) of Directive (EU) 2019/2034, competent …
---------+401. Irrespective of the requirement to hold additional own funds pursuant to Article 39(1), point …
---------+402. In accordance with Article 39(2), point (k) of Directive (EU) 2019/2034 competent authorities …
---------+403. In accordance with Article 39(2), point (b) of Directive (EU) 2019/2034, competent authorities …
---------+404. In accordance with Article 39(2), point (k) of Directive (EU) 2019/2034 competent authorities …
------+10.6 Supervisory reaction to a situation where Pillar 2 requirement is not met
---------+405. Pillar 2 requirement is a legally binding requirement that investment firms have to meet at …
------+10.7 Supervisory reaction to a situation where P2G is not met
---------+406. Competent authorities should monitor whether the amount of own funds expected according to P2G …
---------+407. When the investment firm’s own funds drop, or are likely to drop, below the level determined …
---------+408. There are generally three situations to be considered by a competent authority in which an …
---------+409. Notwithstanding particular supervisory responses in accordance with the previous paragraph …
------+10.8 Interaction between supervisory and early intervention measures
---------+410. In addition to the supervisory measures referred to in this title, for investment firms which …
---------+411. Competent authorities should apply early intervention measures without prejudice to any other …
------+10.9 Interaction between supervisory and AML/CFT measures
---------+412. Where competent authorities in the course of exercising their supervisory activities have …
---------+413. Where the competent authorities are notified or become aware of supervisory measures or …
---+Title 11 Application of SREP to investment firms groups
------+414. This title addresses the application of the common SREP procedures and methodology as …
------+415. In the SREP, competent authorities should also consider the potential ML/TF risks, taking into …
------+416. When assessing prudential implications of ML/TF risks for an investment firm cross-border …
------+11.1 Application of the SREP to cross-border groups
---------+417. When applying the SREP and these guidelines to investment firms groups, competent authorities …
---------+418. In accordance with the scope of application of the guidelines as specified in Title 1: a. …
---------+419. Where these guidelines are applied to the subsidiaries of a cross-border group, competent …
---------+420. The results of any such initial assessment of SREP elements, including, if identified, views …
---------+421. Following the discussions within the framework of colleges of supervisors, competent …
---------+422. Competent authorities should discuss and coordinate the following within the framework of …
------+11.2 SREP capital assessment and investment firm-specific prudential requirements
---------+423. The determination of capital adequacy and requirements in accordance with the process …
---------+424. The exercise of supervisory powers and the taking of supervisory measures, including with …
---------+425. In the context of discussions on the adequacy of the level of own funds and determining …
---------+426. The capital requirement and other capital measures, if applicable, should be set at …
------+11.3 Application of other supervisory measures
---------+427. Competent authorities responsible for the supervision of cross-border investment firms groups …
---------+428. Competent authorities responsible for the prudential supervision of entities of a cross-border …
 English - European Union - Financial Industry -

Guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP) (EBA/GL/2022/09)

Guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP) (EBA/GL/2022/09)

https://www.eba.europa.eu/legacy/regulation-and-policy/regulatory-activities/supervisory-review-and-evaluation-process-srep – PDF

1. Overview

,
Title 1 General provisions

Title 1 General provisions
Title 2 The common SREP

Title 2 The common SREP
Title 3 Monitoring of key indicators

Title 3 Monitoring of key indicators
Title 4 Business model analysis

Title 4 Business model analysis
Title 5 Assessing internal governance and investment firm-wide controls

Title 5 Assessing internal governance and investment firm-wide controls
Title 6 Assessing risks to capital

Title 6 Assessing risks to capital
Title 7 SREP capital assessment

Title 7 SREP capital assessment
Title 8 Assessing risk to liquidity

Title 8 Assessing risk to liquidity
Title 9. Determination of the outcome of liquidity assessment

Title 9. Determination of the outcome of liquidity assessment
Title 10 Overall SREP assessment and application of supervisory measures

Title 10 Overall SREP assessment and application of supervisory measures
Title 11 Application of SREP to investment firms groups

Title 11 Application of SREP to investment firms groups

1.1 References

1.2 Identified Requirements

1.3 Related Standards

2. Identified Requirements

Requirements

3. Related Standards

Standards
  • EBA - Published by the European Banking Authority at https://www.eba.europa.eu/