Definitions

Unless otherwise specified, terms used and defined in Regulation (EU) 2019/2033⁶ , Directive (EU) 2019/2034 or Directive 2014/59/EU⁷ have the same meaning in the guidelines. For the purposes of the guidelines, the following definitions apply:

‘AML/CFT supervisor’ means a competent authority responsible for the supervision of investment firms’ compliance with provisions of Directive (EU) 2015/849.

‘Conduct risk’ means the current or prospective risk of losses to an investment firm arising from cases of wilful or negligent misconduct, including inappropriate supply of financial services.

‘Internal capital adequacy assessment process and internal risk-assessment process (ICARAP)’ means the arrangements, strategies and processes referred to in Article 24 of Directive (EU) 2019/2034, which can be further split into:

‘Internal capital adequacy assessment process (ICAAP)’ meaning arrangements, strategies and processes to assess and maintain on an ongoing basis the amounts, types and distribution of internal capital that the investment firms consider adequate to cover the nature and level of risks which they may pose to others and to which the investment firms themselves are or may be exposed; and

‘Internal liquidity adequacy assessment process (ILAAP)’ meaning arrangements, strategies and processes to assess and maintain on an ongoing basis the amounts, types and distribution of liquid assets that the investment firms consider adequate to cover the nature and level of risks which they may pose to others and to which the investment firms themselves are or may be exposed.

‘Interest rate risk’ (IRR) means the current or prospective risk to the investment firm’s earnings and own funds arising from adverse movements in interest rates.

‘Intraday liquidity’ means the funds that can be accessed during the business day to enable the investment firm to make payments in real time.

‘Intraday liquidity risk’ means the current or prospective risk that the investment firm will fail to manage its intraday liquidity needs effectively.

‘Information and communication technology (ICT) risk’ means the risk of loss due to breach of confidentiality, failure of integrity of systems and data, inappropriateness or unavailability of systems and data, or inability to change IT within a reasonable time and costs when the environment or business requirements change (i.e. agility).

‘Macro-prudential requirement’ or ‘measure’ means a requirement or measure imposed by a competent or designated authority to address macro-prudential or systemic risk.

‘Market supervisor’ means a competent authority responsible for the supervision of investment firms’ compliance with provisions of Directive 2014/65/EU⁸ .

‘Money laundering and terrorist financing (ML/TF) risk’ means the risk as defined in the EBA Guidelines on the ML/TF risk factors⁹ .

‘Overall SREP assessment’ means the up-to-date assessment of the overall viability of an investment firm based on the assessment of the SREP elements.

‘Overall SREP score’ means the numerical indicator of the overall risk to the viability of the investment firm based on the overall SREP assessment.

‘Pillar 2 guidance (P2G)’ means the level and quality of own funds the investment firm is expected to hold in excess of its own funds requirements, determined in accordance with Article 41 of Directive (EU) 2019/2034.

‘Pillar 2 requirement (P2R)’ or ‘additional own funds requirement’ means the additional own funds requirement imposed in accordance with Article 40 of Directive (EU) 2019/2034.

‘Reputational risk’ means the current or prospective risk to the investment firm’s earnings, own funds or liquidity arising from damage to the investment firm’s reputation.

‘Risk appetite’ means the aggregate level and types of risk the investment firm is willing to assume within its risk capacity, in line with its business model, to achieve its strategic objectives.

‘Risk score’ means the numerical expression summarising the supervisory assessment of an individual risk to capital, liquidity and funding representing the likelihood that a risk will have a significant prudential impact on the investment firm after considering risk management and controls and before consideration of the investment firm’s ability to mitigate the risk through available capital or liquidity resources.

’Risks to capital’ means distinct risks that, should they materialise, will have a significant prudential impact on the investment firm’s own funds over the next 12 months. These include but are not limited to risks covered by Articles 29 and 36 of Directive (EU) 2019/2034. ‘Risks to liquidity and funding’ means distinct risks that, should they materialise, will have a significant prudential impact on the investment firm’s liquidity over different time horizons.

‘SREP element’ means one of the following: business model analysis, assessment of internal governance and firm-wide risk controls, assessment of risks to capital, SREP capital assessment, assessment of risks to liquidity and funding, or SREP liquidity assessment.

‘Supervisory benchmarks’ means risk-specific quantitative tools developed by the competent authority to provide an estimation of the own funds required to cover risks or elements of risks not covered by Regulation (EU) 2019/2033.

‘Viability score’ means the numerical expression summarising the supervisory assessment of a SREP element and representing an indication of the risk to the investment firm’s viability stemming from the SREP element assessed.

⁶ Regulation (EU) 2019/2033 of the European Parliament and of the Council of the 27 November 2019 on the prudential requirements of investment firms and amending Regulations (EU) No 1093/2010, (EU) No 575/2013, (EU) No 600/2014 and (EU) No 806/2014 (OJ L 314 5.12.2019, p. 1).

⁷ Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the Council (OJ L 173 12.6.2014, p. 190).

⁸ Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (OJ L 173 12.6.2014, p. 349).

⁹ EBA Guidelines on customer due diligence and the factors credit and financial institutions should consider when assessing the money laundering and terrorist financing risk associated with individual business relationships and occasional transactions (‘The ML/TF Risk Factors Guidelines’) under Articles 17 and 18(4) of Directive (EU) 2015/849 (EBA/GL/2021/02)