What is the SREP? Annual supervisory review and evaluation of institutions
Annual assessment and scoring of all significant banks in the Eurozone
A foundational element of the supervisory practice of the ECB Banking Supervision is the Supervisory Review and Evaluation Process (SREP), basis of which is EBA/GL/2022/03 – “Guidelines on common procedures and methodologies for the supervisory review and evaluation process and supervisory stress testing“. The SREP is an annual, robust, intrusive analysis of all significant banks in the Eurozone. When performing the SREP, the ECB looks into four building blocks, each of which is separately rated with a score between 1 and 4:
- business model and strategy of the institution,
- internal governance and control framework,
- risks to capital and adequacy of own funds,
- liquidity and funding risk, as well as adequacy of liquidity.
- Business model analysis
- Governance and risk management
- Risk and capital
- Liquidity and finance
Business model analysis
Functionality, viability and sustainability of the business model
Governance and risk management
Adequacy of internal governance and risk management methods and processes
Risk and capital
Assessment of risks and controls
Determination of capital requirements & stress test
Internal Capital Adequacy Assessment Process (ICAAP)
Liquidity and finance
Assessment of risks and controls
Determination of liquidity requirements & stress test
Internal Liquidity Adequacy Assessment Process (ILAAP)
Depending on the ECB’s assessment of the bank as a whole, the assigned scores to the four underlying building blocks as well as the detailed findings the ECB has come up with banks will
- at a minimum, receive individual capital surcharges,
- may also be obliged to adhere to additional individual liquidity requirements as wells as
- receive qualitative measures.
Adherence to these SREP measures is mandatory and will be closely monitored by the ECB.
What needs to be done?
Tackle the supervisory challenges!
PwC is your dedicated partner and well suited to helping you gain a quick and systematic overview of your bank‘s level of preparedness regarding the extensive requirements and expectations of the ECB under the SREP.
PwC SREP
PwC can help analyse and assess the extent to which your bank's processes and documentation already meet the ECB's requirements. In doing so, we are always in line with the ECB's SREP and covers the topics of business model analysis, governance & risk appetite framework, capital adequacy and ICAAP as well as liquidity adequacy and ILAAP.
PwC checklist
PwC has analysed the extensive requirements of the EBA and the ECB in detail. As a result of this analysis, we developed comprehensive compliance checklists to help ensure the completeness and adequacy of the prudential requirements (e.g., the annual collection of information on the ICAAP and ILAAP by the ECB represents the essential basis for assessing the governance, capital and liquidity risks of the respective bank).
PwC benchmarks
We draw our extensive experience from numerous projects in the context of ECB banking supervision, the ongoing analysis of ECB SREP letters, results of on-site inspections and other ECB pronouncements and, last but not least, from our direct communication with the ECB. This experience helps us to identify supervisory trends at an early stage and, in particular, to read "between the lines" of published supervisory requirements.
Be on par with the ECB!
The ECB’s SREP holds up a mirror to you – and shows you a ruthless picture of your bank and your bank’s weaknesses and deficiencies.
The ECB cannot fix this. PwC can!
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