EBA欧洲银行-Consultation-Paper-on-Guidelines-on-common-procedures-and-methodology-for-SREP-28EBA-CP-2017-1829_93页_1mb

Summary of EBA/CP/2017/18: Draft Guidelines on Revised Common Procedures and Methodologies for the SREP and Supervisory Stress Testing

Core Content

The European Banking Authority (EBA) has published a Consultation Paper on Draft Guidelines for the revised common procedures and methodologies for the Supervisory Review and Evaluation Process (SREP) and Supervisory Stress Testing, in line with its Pillar 2 Roadmap. These guidelines aim to update and enhance the existing SREP framework, which was first published in 2014 and applied in 2016.

The revised SREP framework includes supervisory stress testing as a key component and is intended to ensure convergence of supervisory practices across the EU. The updates are based on recent developments in EU and international banking standards, including the Pillar 2 Capital Guidance (P2G), the Basel Committee's revised IRRBB framework, and the clarification of the MDA framework.

Main Objectives

• To ensure consistency and convergence in supervisory practices across the EU.
• To incorporate supervisory stress testing into the SREP process, in accordance with Article 100(2) of Directive 2013/36/EU.
• To align the SREP framework with the EBA's Guidelines on IRRBB and the Supervisory Handbook.
• To improve the integration of SREP with recovery planning and early intervention processes.

Key Revisions

1. Title and Scope

• The title now includes "and supervisory stress testing".
• The guidelines now provide common methodologies for supervisory stress testing conducted as part of the SREP.

2. Definitions

• New definitions are introduced, including:
  • Consolidating institution
  • Pillar 2 Capital Guidance (P2G)
  • Pillar 2 Capital Requirement (P2R)
  • Risk score
  • Viability score
  • Overall SREP score

3. Scoring Framework

• Competent authorities should use a rating scale from 1 to 4 to score individual SREP elements, reflecting the supervisory view of risk and viability.
• Risk scores are assigned to individual risks to capital, liquidity, and funding, based on the likelihood of significant prudential impact.
• Viability scores are assigned to the four SREP elements and the Overall SREP score, indicating the risk to the institution’s viability.
• Risk scores are determined primarily based on inherent risk, with consideration given to risk management and controls.
• Aggregation methodologies may be used for internal purposes, but the overall scoring framework must be respected.

4. Integration with Other Supervisory Processes

• The SREP process should integrate information from all supervisory activities, such as on-site inspections, fit & proper assessments, market conduct, AML/CTF activities, and recovery plan assessments.
• The assessment of recovery plans should feed into the SREP process, and vice versa.
• The SREP viability scores and Overall SREP score are used to determine whether an institution is 'failing or likely to fail', which triggers formal early intervention and resolution procedures.

5. Link to Early Intervention and Resolution

• The Overall SREP score and viability scores serve as triggers for early intervention measures.
• An Overall SREP score of '4' or a combination of '3' and '4' on specific elements indicates the need for early intervention.
• An Overall SREP score 'F' indicates that the institution is not viable, and thus may be considered as 'failing or likely to fail'.

6. Supervisory Stress Testing

• The guidelines outline different forms of supervisory stress testing and their objectives.
• They describe the organisation, resources, and communication involved in stress testing.
• Supervisory stress testing is distinct from the Union-wide stress tests conducted under Article 22 of Regulation (EU) 1093/2010.
• Stress testing results can inform P2G and supervisory capital requirements.

7. Compliance and Monitoring

• The EBA is responsible for monitoring and assessing supervisory convergence, as per Article 107 of Directive 2013/36/EU.
• Findings from convergence assessments are reflected in the revised SREP Guidelines.

Key Information

• Consultation Period: Comments should be submitted by 31 January 2018 via the consultation page.
• Confidentiality: Respondents must specify whether they want their comments to be public or confidential.
• Data Protection: The EBA complies with Regulation (EC) No 45/2001 on data protection.
• Effective Date: The revised guidelines will apply from 1 January 2019, and should be used in the 2019 SREP cycle.
• Complementary Documents:
  • EBA Guidelines on triggers for early intervention.
  • EBA Guidelines on interpretation of 'failing or likely to fail'.
  • EBA Supervisory Handbook on recovery planning.

Conclusion

The revised SREP guidelines aim to enhance supervisory convergence, risk assessment, and capital adequacy monitoring. They introduce a more structured and integrated approach to supervisory stress testing and early intervention, ensuring that competent authorities have a common framework to assess institutions and take appropriate supervisory actions. The guidelines are aligned with the EU regulatory framework, including Regulation (EU) 575/2013, Directive 2013/36/EU, and Directive 2014/59/EU, and are designed to support consistent and effective supervision across the EU.