Response to consultation on guidelines for common procedures and methodologies for the supervisory review and evaluation process (SREP)
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However, it is important to consider the interdependencies between institutions and how this translates into the ultimate level of systemic risk within the financial system. For example, stress testing of the system may need to capture transmission mechanisms of the shocks through some of the institutions outside the defined level 1 category.
Q2. Do you agree with the proportionate approach to the application of the SREP to different categories of institutions? (Title 2)
We agree proportionality is an important component of the regulatory architecture. Competent authorities should allocate their resources based on their assessment of the overall risk the failure of an institution could pose to the financial system. The categorisation of institutions into four categories is an appropriate expression of this proportionate approach.However, it is important to consider the interdependencies between institutions and how this translates into the ultimate level of systemic risk within the financial system. For example, stress testing of the system may need to capture transmission mechanisms of the shocks through some of the institutions outside the defined level 1 category.
Q3. Are there other drivers of business model / strategy success and failure that you believe competent authorities should consider when conducting the BMA? (Title 4)
No, we are satisfied with what has been identified in the consultation paper.Q4. Does the breakdown of risk categories and sub-categories proposed provide appropriate coverage and scope for conducting supervisory risk assessments? (Title 6)
Yes, we believe the breakdown is comprehensive. However, as per our response to question 1, the guidelines do not further elaborate on the methodologies to use to assess and quantify those risks.Q5. Do you agree with the use of a standard approach for the articulation of additional own funds requirements to be used by compete authorities across the Union? (Title 7)
Yes, a common approach to the articulation of any additional own funds would be welcomed. However, capital is not the only answer; risk mitigation plans can often be more beneficial and this is an important component in introducing consistency to the Pillar 2 process.Q6. Do you agree that competent authorities should be granted additional transition periods for meeting certain capital and liquidity provisions in the guidelines (Title 12)?
Yes.Upload files
BBA01-#438729-v1-BBA_Response_to_EBA_SREP_CP.pdf
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