08 January 2016

ECB: Supervisory expectations on ICAAP and ILAAP and harmonised information collection on ICAAP and ILAAP

In order to encourage institutions to develop and maintain high-quality ICAAPs and ILAAPs, and to clarify the type of information they should share with the SSM on these, respective expectations have been issued by the SSM.

Internal capital and liquidity adequacy assessment processes (ICAAPs and ILAAPs) are key risk management instruments for credit institutions. When reliable, these processes can provide a substantial input into the determination of the capital and liquidity requirements in the Supervisory Review and Evaluation Process (SREP). Accordingly, supervisory teams need to be in a position to assess the reliability of these ICAAPs and ILAAPs when performing the SREP. This was for instance stated in the Guide to Banking Supervision.

The experience of 2015 revealed that the information submitted by significant institutions on their ICAAPs and ILAAPs was often not in line with Single Supervisory Mechanism (SSM) expectations. This partly reflected a wide range of practices within SSM countries so far.

The European Central Bank’s (ECB) baseline expectations with regard to nine ICAAP areas that will also be used under ECB’sharmonised assessment of ICAAPs:

• Governance
• General design of the ICAAP
• ICAAP perspective
• Risks considered
• Definition of internal capital
• Assumptions and key parameters
• Inter-risk diversification effects

ECB would like to stress the importance of following the guidance in the EBA’s Guidelines on ICAAP and ILAAP information collected for SREP purposes in order to ensure a minimum level of harmonisation for the assessment and focus its expectations on following areas:

• General definition of the ILAAP
• ILAAP reporting

Linked to harmonised collection of information on ICAAP and ILAAP, ECB’s expectations focus on:

• Specifications regarding dates and format
• Specifications regarding content and
• ICAAP-specific information

Full information

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