Overall SREP assessment
In determining the overall SREP assessment, competent authorities should consider the findings of the assessments of the SREP elements, specifically:
the risks to which the institution is or may be exposed;
the likelihood that the institution’s governance, control deficiencies and/or business model or strategy are likely to exacerbate or mitigate these risks, or expose the institution to new sources of risk;
whether the institution’s own funds and liquidity resources provide sound coverage of these risks;
the potential for positive and negative interaction between the elements (e.g. competent authorities may consider a strong capital position to be a potential mitigating factor for certain concerns identified in the area of liquidity and funding, or by contrast, that a weak capital position may exacerbate concerns in that area).
On the basis of these considerations, competent authorities should determine the institution’s viability, defined as its proximity to a point of non-viability on the basis of the adequacy of its own funds and liquidity resources, governance, controls and/or business model or strategy to cover the risks to which it is or may be exposed. As a result of this determination, competent authorities should:
take any supervisory measures necessary to address concerns;
determine future supervisory resourcing and planning for the institution, including whether any specific supervisory activities should be planned for the institution as part of the Supervisory Examination Programme;
determine the need for early intervention measures as specified in Article 27 of Directive 2014/59/EU;
determine whether the institution can be considered to be ‘failing or likely to fail’ within the meaning of Article 32 of Directive 2014/59/EU.
The overall SREP assessment should be reflected in a viability score based on the considerations specified in table 20 and clearly documented in an annual summary of the overall SREP assessment. This annual summary should also include the overall SREP score and scores for elements of the SREP, and any supervisory findings made over the course of the previous 12 months.
Table 20. Supervisory considerations for assigning the overall SREP score
Supervisory view | Considerations |
The risks identified pose a low level of risk to the viability of the institution. | • The institution’s business model and strategy do not raise concerns. • The internal governance and institution-wide control arrangements do not raise concerns. • The institution’s risks to capital and liquidity pose a non-material/a very low risk of a significant prudential impact. • The composition and quantity of own funds held do not raise concerns. • The institution’s liquidity position and funding profile do not raise concerns. • No material concerns about the credibility and feasibility of the institution’s recovery plan. |
The risks identified pose a medium-low level of risk to the viability of the institution. | • There is a low to medium level of concern about the institution’s business model and strategy. • There is a low to medium level of concern about the institution’s governance or institution-wide control arrangements. • There is a low to medium level of risk of a significant prudential impact caused by risks to capital and liquidity. • There is a low to medium level of concern about the composition and quantity of own funds held. • There is a low to medium level of concern about the institution’s liquidity position and/or funding profile. • There is a low to medium level of concern about the credibility and feasibility of the institution’s recovery plan. |
The risks identified pose a medium-high level of risk to the viability of the institution. | • There is a medium to high level of concern about the institution’s business model and strategy. • There is a medium to high level of concern about the institution’s governance or institution-wide control arrangements. • There is a medium to high level of risk of a significant prudential impact caused by risks to capital and liquidity. |
Score
1
2
3
Supervisory view | Considerations |
• There is a medium to high level of concern about the composition and quantity of own funds held by the institution. • There is a medium to high level of concern about the institution’s liquidity position and/or funding profile. • There is a medium to high level of concern about the credibility and feasibility of the institution’s recovery plan | |
The risks identified pose a high level of risk to the viability of the institution. | • There is a high level of concern about the institution’s business model and strategy. • There is a high level of concern about the institution’s governance or institution-wide control arrangements. • There is a high level of risk of a significant prudential impact caused by risks to capital and liquidity. • There is a high level of concern about the composition and quantity of own funds held by the institution. • There is a high level of concern about the institution’s liquidity position and/or funding profile. • There is a high level of concern about the credibility and feasibility of the institution’s recovery plan. |
Score
4
When determining that an institution is ‘failing or likely to fail’, as reflected by an overall SREP score of ‘F’, competent authorities should engage with the resolution authorities to consult on findings following the procedure specified in Article 32 of Directive 2014/59/EU.