6.3 Information on internal capital and capital allocation

On internal capital definition and the capital allocation used within ICAAP, competent authorities should ensure that they receive from institutions the following:

• a. definition of the internal capital used to cover ICAAP capital estimates, including all the capital elements/instruments considered;
• b. description of the main differences between internal capital elements/instruments and regulatory own funds instruments, where appropriate;
• c. description of the methodology and assumptions used for the allocation of internal capital to group entities, and of the core business lines and markets, where appropriate;
• d. description of the monitoring process (comparison of internal capital estimates vs. allocated capital), including escalation procedures.

6.3.2 Operational documentation

On evidencing the full implementation of the internal capital definition and the capital allocation framework within ICAAP, competent authorities should ensure that they receive from institutions the following:

• a. amount of internal capital available to date, broken down by various elements considered;
• b. actual amounts of the internal capital allocated to risks covered by ICAAP and group entities, and core business lines and markets, where relevant;
• c. quantitative comparison between the actual internal capital usage relative to the internal capital allocated based on ICAAP estimates supported by an explanation of cases where actual capital usage is close to or exceeds the allocated capital.