In the Report, the European Banking Authority (EBA) notes that good progress has been made by competent authorities in the implementation of the Supervisory Review and Evaluation Process (SREP) Guidelines as well as in taking forward recommendations and observations made by the EBA during the 2016 bilateral convergence visits.
A significant degree of convergence across the single market has already been achieved through the application of the EBA's SREP guidelines. The Report highlights, however, a number of remaining challenges in converging capital adequacy assessments and determining institution-specific additional own funds requirements (P2R).
In particular, the Report observes different approaches in the use of the outcomes for banks' own internal capital adequacy assessment process (ICAAP), disparity of risk taxonomies, and differences in the clarity of the risk-by-risk determination of P2R, as well as the use of P2R for macroprudential purposes.
In turn, this leads to differences in the articulation and communication of P2R to supervised institutions. Finally, the Report notes the widespread use of Pillar 2 Guidance (P2G), but limited experience in this area makes the analysis of the first wave of application of P2G difficult.
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