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The Guidelines hinge on four main components: (i) business model analysis; (ii) assessment of internal governance; (iii) assessment of risks to capital and adequacy of capital; (iv) assessment of risks to liquidity and adequacy of liquidity. The assessment is summarised in a common scoring and leads to a consistent approach in setting supervisory requirements to hold additional capital and liquidity resources, as needed.
These Guidelines recognise the proportionality principle and the importance of supervisory judgement, providing a flexible but constrained framework for all EU supervisors. Moreover, they also recognise longer transitional arrangements for the application of certain quantitative liquidity and capital supervisory provisions.
The Guidelines will apply from 1 January 2016 and are addressed to all competent authorities across the Union, including the SSM, who are expected to comply by incorporating them into their supervisory practices, thus amending their respective legal frameworks or their supervisory processes accordingly. All Competent Authorities will ensure that EU credit institutions, including cross-border banking groups operating both within and outside the Eurozone, implement them when assessing risks as well as capital and liquidity adequacy.