Authors: Kalliopi Bratika, Vangelis Manouvelos
Title: Banking Supervision: Can the Supervisory Review and Evaluation Process (SREP) become a gold standard for the European Banks?
Abstract
In the 2008 financial crisis, banking supervision was heavily criticized for not having foreseen and taken measures to limit its ramifications. The result was an intensification of supervision in all banking activities. For Significant Institutions supervision has been gathered to one – point of reference: since 2014 the Single Supervisory Mechanism (SSM) is in charge to assess the risks faced by banks and check if they are adequately equipped to manage them effectively.
Banks continue to face crucial challenges daily, and in this paper we look into the four elements which compose the Supervisory Review and Evaluation Process (SREP), which is used by supervisors for both Significant (SIs) and Less Significant Institutions (LSIs):
We examine the perspectives and risks that the institutions should consider, as well as all the parameters and key issues that Banks need to deal with in order to have a satisfactory SREP grade.
In order to further understand the way in which SSM (for SIs) and the National Authorities (for LSIs) use the Internal Capital Adequacy Assessment Process (ICAAP) and the Internal Liquidity Adequacy Assessment Process (ILAAP) Reports, we examine the seven principles published by ECB in the two Guides regarding both ICAAP and ILAAP published on November 2018. These principles are used by SSM, in the assessment of each institution’s ICAAP and ILAAP as part of the SREP.
Moreover, we analyze the quantitative and qualitative SREP results at European level for 2019, examining in particular the measures and risks that the institutions have taken into consideration. Finally we look into the SSM supervisory priorities for 2020 in the following major areas: Continuing the Balance Sheet Repair and Strengthening Future Resilience.

