According to Article 144(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).
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. 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 and the identification of any weaknesses or inadequacies and necessary prudential measures.
For supervisory disclosure purposes, the European banking Authority (EBA) (former CEBS) identified four conceptual building blocks of supervisory activity that constitute the core of the SREP. They are common to all competent authorities. For an overview of the SREP conducted by the Bank see the SREP Table:
- Scope of application of SREP (including proportionality)
- Individual Risk Assessment
- Review and Evaluation of ICAAP
- Overall assessment and supervisory measures