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Home > Prudential Regulation Authority > The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP) - SS31/15 UPDATED
 

The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP) - SS31/15 UPDATED

03 August 2015

1 February 2017: Content on this page has been updated see:
 

The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP) - SS31/15 UPDATE

For information only, the publication issued on 3 August 2015 is available below.

 
Update 3 August 2015: A new chapter on reverse stress testing was added to SS31/15 following consultation on proposals in Consultation Paper 17/15, ‘The PRA Rulebook Part 3’. This update supplements the PRA’s expectations set out in the original statement, published on 29 July 2015.

This supervisory statement is aimed at firms to which CRD IV (see note 1 below) applies and replaces Supervisory Statement 5/13 ‘The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP)’ and Supervisory Statement 6/13 ‘Stress testing, scenario analysis and capital planning’.

SS31/15 provides further detail in relation to the high-level expectations outlined in The PRA’s approach to banking supervision and should be read in conjunction with Statement of Policy - The PRA’s methodologies for setting Pillar 2 capital.

Overview

The supervisory statement has five chapters:

Chapter 1: Introduction.

Chapter 2: Expectations of firms undertaking an ICAAP sets out the expectations the PRA has in relation to the ICAAP and the requirements set out in the Internal Capital Adequacy Assessment (ICAA) part of the PRA Rulebook. It sets out the PRA’s expectations regarding firms’ coverage and treatment of interest rate risk in the non-trading book (more commonly referred to as interest rate risk in the banking book or IRRBB), market risk, group risk, operational risk, pension obligation risk and foreign currency lending to unhedged retail and SME borrowers. It also provides additional detail on data that firms are required or expected to submit with their ICAAP document or otherwise as applicable.

Chapter 3: Stress testing, scenario analysis and capital planning sets out the PRA’s expectations of firms in relation to stress testing, scenario analysis and capital planning, and the requirements set out in Chapter 12 of the ICAA Part of the PRA Rulebook.

Chapter 4: Reverse stress testing sets out the PRA’s expectations of firms in relation to reverse stress testing and the requirements set out in Chapter 15 of the ICAA Part of the PRA Rulebook.

Chapter 5: The SREP sets out the factors that the PRA takes into consideration to assess a firm’s ICAAP. It explains the setting of Individual Capital Guidance (ICG) and the PRA buffer, the consequences in the event a firm fails to meet ICG or uses the PRA buffer, and disclosure.

Note 1: The Capital Requirements Directive (2013/36/EU) (CRD) and the Capital Requirements Regulation (575/2013) (CRR), jointly ‘CRD IV’.

Supervisory Statement

The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP) – SS31/15 UPDATE

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