EBA harmonises the supervisory review and evaluation process of investment firms

On July 21st, the European Banking Authority (EBA) and the ESMA have published the final Guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP) for investment firms. The EBA published also the final draft Regulatory Technical Standards (RTS) on Pillar 2 add-ons for investment firms.

The main objective of these guidelines is to ensure consistency in supervisory practices in the assessment of class 2 and class 3 investment firms. Although addressed to the competent authorities the SREP guidelines are a key document for firms to assess what could be the supervisory focus post IFR/IFD. By reviewing these SREP guidelines institutions can proactively review internal rules and arrangements such as internal governance, risk management or their ICARAP in light of the attention points detailed in the SREP guidelines.

The EBA has also published a final draft RTS on Pillar 2 add-ons. The RTS ensure a consistent EU wide determination of additional capital requirements to cover risks or elements of risks not covered or insufficiently covered by Pillar 1 requirements (such as ICT risk or credit risk or operational risks not covered under IFR).

What are the key observations on the SREP guidelines of this publication:

  • These SREP guidelines are specifically addressed to the supervision of Class 2 and Class 3 firms.
  • Class 2 firms are further subdivided into 3 distinct categories, which translate into different frequency, depth and intensity of the assessments, and the engagement of the competent authority.
  • The focus points included in the guidelines are the following:
    • business model;
    • governance arrangements and firm-wide controls;
    • risks to capital and capital adequacy;
    • liquidity risk and liquidity adequacy.
  • Link to IFR: The SREP guidelines contain specific focus points per K-factor that need to be taken into account.

Do you want to learn more on how b.fine can guide you through these adaptations for IFR/IFD regulation? Don’t hesitate to reach out to our team.

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