Chappuis Halder - SREP one pager april 2015
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Transcript of Chappuis Halder - SREP one pager april 2015
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Risk Assessment
Score
ILAAP
Internal Target
ECB in the starting block for SREP review
The Supervisory Review and Evaluation Process (SREP) is a wide risk assessment of the bank businessmodel, governance, capital and liquidity performed by the European Central Bank (ECB) starting endof 2015
SREP quantitative assessment will be based on banks regulatory reportings (COREP, FINREP, STE, ),whereas qualitative assessmentwill be performed through the supervisory dialog
Final objectives of the supervisor are to quantify Pillar II capital and liquidity extra requirements andto start building benchmarks for banks under its supervision
Supervisory Review and Evaluation Process
SREP Score is made ofthree distinct parts
1 2 3 4 F
SREP SCORE SREP QUANTIFICATION SREP ASSESSMENTA B C
Business Model Assessment
Governance and Risk Model Risk by Risk Capital Assessment Liquidity Assessment
Visibility and sustainability of Business Model
Adequacy of governance and risk
model
ICAAP
benchmarking
Stressed ICAAP
benchmarking
Risk Assessment
Score
Pillar II capital requirement(s)
Pillar II liquidity requirement(s)
A1 A2 A3 B1 B2 A4 B3
B SREP ASSESSMENTRating between 1 and F(failure) communicatedannually to boards ofbanks
A C+ +Overall score
SREP evaluation will be based on the following criteria: Governance | Analysing consistency in internal governance and controls, procedures and processes Business models | Studying the business environment as well as the sustainability of the strategy,
financial plans, profitability forecasts Capital adequacy | Assessing risk contributions to capital (Pillar I as well as Pillar II risks / ICAAP and
Stressed ICAAP) and the consistency of risk measures Liquidity and funding| Identifying risks to liquidity, as well as liquidity sources and resources and
their capacity to cover liquidity and funding needs in terms of financial and economic distress (including ILAAP / article 86 of CRD IV) 1/2
SREP Methodology overview
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Governance / capital & liquidity allocation
Methodologies, models, data
EBA underlying objectives Implications for the financial institutions
Control & processes
Strengthen risk appetite definition and documentation
Harmonisation of ICAAP, stressed ICAAP and ILAAP frameworks
Homogenise capital & liquidity measures Understand detailed banks business
models (profitability, forecasting, operational efficiency)
Ensure Pillar II coverage of all risks (rate risk - IRRBB, concentration, diversification effect, reputation) not measured with Pillar 1
Ensure comprehensiveness of data framework (linkages with BCBS 239 and post-AQR action plan)
Simplification, strengthening and harmonisation of control & monitoring framework
Review of ICAAP & ILAAP framework Adjustment of risks to capital profile
& liquidity and funding risk profile Less flexibility in terms of capital &
liquidity allocation
Challenge of all deviations, exceptions, exemptions validated by the local regulator so far
Potential P&L and Balance Sheet impacts
Less flexibility in terms of methodology andmodel design
Establish new control processes between regulatory reporting
Enhance monitoring and reporting tools
Improve IT architecture
1
2
3
2/2
Supervisory Review and Evaluation Process
Vincent [email protected]
Charles [email protected]
SREP induces 3 major challenges for the Financial Institutions
Our approach
We have built a methodology in order to anticipate SREP process based on market practice and our Pillar II expertise
We have prepared a benchmark and sensitivity analysis to anticipate the key drivers your SREP process
As a result we are able to prepare a detailed work plan in order to help bank to be ready for the supervisory dialog
