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Supervisory Review
According to Article 144 lit. c of directive 2006/48/EC competent authorities are required to disclose the general criteria and methodologies they use in the review and evaluation process referred to in Article 124 (SREP, transposed in Article 69b lit. 4 of the Austrian Banking Act, BWG).
The Supervisory Review and Evaluation Process (SREP) is one element of the larger Supervisory Review Process, the other element being the Internal Capital Adequacy Assessment Process (ICAAP).
The ICAAP is conducted by the institution. It is a comprehensive process including the management body and senior management oversight, monitoring, reporting and internal control reviews, that institutions must have to identify and measure their risks, allowing them to ensure that adequate provision is made for holding internal capital in relation to their risk profile (see § 39a BWG). The approach chosen has to be proportionate to the nature, scale and complexity of the activities of the institution concerned.
The Supervisory Review and Evaluation Process (SREP) is conducted by the competent authority. It is the comprehensive process which supervisors use to review and evaluate the institutions' exposure to risks and the adequacy and reliability of the institutions' Internal Capital Adequacy Assessment Process (ICAAP). Furthermore, it encompasses the monitoring of the ongoing compliance with standards laid down in the directive (i.e. supervisory evaluation of compliance) and the identification of any weaknesses or inadequacies and necessary prudential measures (see § 69 BWG).
For supervisory disclosure purposes, the Committee of European Banking Supervisors (CEBS) identified four conceptual building blocks of supervisory activity that constitute the core of the SREP. They are common to all competent authorities (see Table of Information):
- Scope of application of SREP (including proportionality)
- Individual Risk Assessment
- Review and Evaluation of ICAAP
- Overall assessment and supervisory measures
For an overview regarding the general criteria and methodologies used in each EU Member State in the review and evaluation process see the corresponding section on the CEBS homepage.
