Subject matter, scope and definitions, and implementation

These guidelines specify the common procedures and methodologies for the functioning of the supervisory review and evaluation process (SREP) referred to in Articles 48n, 97 and 107(1)(a) of Directive 2013/36/EU⁽¹¹⁾, including those for the assessment of the organisation and treatment of risks, including money laundering and terrorist financing, referred to in Articles 76 to 87 of that Directive, and the processes and actions taken with reference to Articles 48o, 98, 100, 101, 102, 104, 104a, 104b, 104c, 105, 107(1)(b) and 117 of that Directive. These guidelines aim to provide common methodologies to be used by competent authorities when conducting supervisory stress tests in the context of their SREP referred to in Article 100(2) of Directive 2013/36/EU. In addition, these guidelines also specify in accordance with Article 104a(7) (opens EUR-Lex in a new tab) of Directive (EU) 2024/1619 (opens EUR-Lex in a new tab) on how to operationalise the requirements where an institution has become bound by the output floor.

These guidelines do not set methodologies for the stress tests conducted by the EBA in cooperation with other competent authorities in accordance with Article 22 of Regulation (EU) No 1093/2010; however, they do describe the range of stress tests to help set the appropriate context for the consideration of future EBA stress tests as one part of the supervisory stress tests.

Competent authorities should apply these guidelines in accordance with the level of application determined in Article 110 of Directive 2013/36/EU following the requirements and waivers used pursuant to Articles 108 and 109 of Directive 2013/36/EU.

For parent undertakings and subsidiaries included in the consolidation, competent authorities should adjust the depth and the level of granularity of their assessments to correspond to the level of application established in the requirements of Regulation (EU) No 575/2013 specified in Part One, Title II of that Regulation, in particular recognising waivers applied pursuant to Articles 7, 10 and 15 of Regulation (EU) No 575/2013 and Article 21 of Directive 2013/36/EU.

Where an institution has a subsidiary in the same Member State, but no waivers specified in Part One of Regulation (EU) No 575/2013 have been granted, a proportionate approach for the assessment of capital and liquidity adequacy may be applied by focusing on the assessment of allocation of capital and liquidity across the entities and potential impediments to the transferability of capital or liquidity within the group.

For cross-border groups, procedural requirements should be applied in a coordinated manner within the framework of colleges of supervisors established pursuant to Article 116 or 51 of Directive 2013/36/EU. Title 10 explains the details of how these guidelines apply to cross-border groups and their entities.

When an institution has established a liquidity subgroup pursuant to Article 8 of Regulation (EU) No 575/2013, competent authorities should conduct their assessment of risks to liquidity and funding, and apply supervisory measures, for the entities covered by such a subgroup at the level of the liquidity subgroup.

These guidelines are addressed to competent authorities as defined in Article 4(2), points (i) and (viii) of Regulation (EU) No 1093/2010.

Unless otherwise specified, terms used and defined in Regulation (EU) No 575/2013⁽¹²⁾, Directive 2013/36/EU, Directive 2014/59/EU⁽¹³⁾ or the EBA Guidelines on institutions’ stress testing⁽¹⁴⁾, have the same meaning in the guidelines. In addition, for the purposes of these guidelines, the following definitions apply:

‘AML/CFT supervisor’ means a supervisory authority, as defined under Article 2(1), point (45) (opens EUR-Lex in a new tab), of Regulation (EU) 2024/1624 (opens EUR-Lex in a new tab), responsible for the supervision of institutions’ compliance with provisions of that Regulation.

‘Capital buffer requirements’ means the own funds requirements specified in Chapter 4 of Title VII of Directive 2013/36/EU. ‘Consolidating institution’ means an institution that is required to abide by the prudential requirements on the basis of the consolidated situation in accordance with Part 1, Title 2, Chapter 2 of Regulation (EU) No 575/2013.

‘Counterbalancing capacity’ means the institution’s ability to hold, or have access to, excess liquidity over short-term, medium-term and long-term time horizons in response to stress scenarios.

‘Funding risk’ means the risk that the institution will not have stable sources of funding in the medium and long term, resulting in the current or prospective risk that it will not be able to meet its financial obligations such as payments and collateral needs as they fall due in the medium-to-long term, either at all or without unacceptable funding cost increases.

‘FX lending’ means lending to borrowers, regardless of the legal form of the credit facility (e.g. including deferred payments or similar financial accommodations), in currencies other than the legal tender of the country in which the borrower is domiciled.

‘FX lending risk’ means the current or prospective risk to the institution’s earnings and own funds arising from FX lending to unhedged borrowers.

‘Internal capital adequacy assessment process (ICAAP)’ means the process for the identification, measurement, management and monitoring of internal capital implemented by the institution pursuant to Article 73 of Directive 2013/36/EU.

‘Internal liquidity adequacy assessment process (ILAAP)’ means the process for the identification, measurement, management and monitoring of liquidity implemented by the institution pursuant to Article 86 of Directive 2013/36/EU.

‘Institution’s category’ means the indicator of the institution’s systemic importance assigned based on the institution’s size and complexity, and the scope of its activities.

‘Intraday liquidity risk’ means the current or prospective risk that the institution will fail to manage its intraday liquidity needs effectively.

‘Macro-prudential requirement’ or ‘measure’ means a requirement or measure imposed by a competent or designated authority to address macroprudential or systemic risk.

‘Material currency’ means a currency in which the institution has material balance-sheet or off-balance-sheet positions. ‘Money laundering and terrorist financing (ML/TF) risk’ means the risk as defined in the EBA Risk-Based Supervision Guidelines⁽¹⁵⁾.

‘Operational resilience’ means the ability of an institution to deliver critical or important functions through disruption.

‘Overall capital requirement (OCR)’ means the sum of the total SREP capital requirement (TSCR), capital buffer requirements and macroprudential requirements, when expressed as own funds requirements.

‘Overall leverage ratio requirement (OLRR)’ means the sum of the total SREP leverage ratio requirement (TSLRR) and the G-SII leverage ratio buffer requirement in accordance with Article 92(1a) of Regulation (EU) No 575/2013.

‘Overall SREP assessment’ means the up-to-date assessment of the overall viability of an institution based on assessment of the SREP elements.

‘Overall SREP score’ means the numerical indicator of the overall risk to the viability of the institution based on the overall SREP assessment.

‘Pillar 1 own funds requirements’ or ‘P1R’ means the own funds requirements the institution is required to hold in accordance with Parts Three, Four and Seven of Regulation (EU) No 575/2013 and Chapter 2 of Regulation (EU) 2017/2402.

‘Pillar 2 guidance’ or ‘P2G’ means the level and quality of own funds the institution is expected to hold in excess of its OCR, determined in accordance with the criteria specified in these guidelines.

‘Pillar 2 guidance for the risk of excessive leverage’ or ‘P2G-LR’ means the level and quality of own funds the institution is expected to hold in excess of its OLRR, determined in accordance with the criteria specified in these guidelines.

‘Pillar 2 requirement’ or ‘P2R’ means the additional own funds requirements imposed in accordance with Article 104(1)(a) of Directive 2013/36/EU to address risks other than the risk of excessive leverage.

‘Pillar 2 requirement for the risk of excessive leverage’ or ‘P2R-LR’ means the additional own funds requirements imposed in accordance with Article 104(1)(a) of Directive 2013/36/EU to address the risk of excessive leverage.

‘Reputational risk’ means the current or prospective risk to the institution’s earnings, own funds or liquidity arising from damage to the institution’s reputation. ‘Risk appetite’ means the aggregate level and types of risk the institution is willing to assume within its risk capacity, in line with its business model, to achieve its strategic objectives.

‘Risk score’ means the numerical expression summarising the supervisory assessment of an individual risk to capital, liquidity and funding representing the likelihood that a risk will have a significant prudential impact on the institution (e.g. potential loss) after considering risk management and controls and before consideration of the institution’s ability to mitigate the risk through available capital or liquidity resources.

‘Risks to capital’ means distinct risks that, should they materialise, will have a significant prudential impact on the institution’s own funds over the next 12 months. These include but are not limited to risks covered by Articles 79 to 87 of Directive 2013/36/EU.

‘Risks to liquidity and funding’ means distinct risks that, should they materialise, will have a significant prudential impact on the institution’s liquidity over different time horizons.

‘SREP element’ means one of the following: business model analysis, assessment of internal governance and institution-wide risk controls, assessment of risks to capital, SREP capital assessment, or SREP liquidity and funding assessment.

‘Supervisory benchmarks’ means risk-specific quantitative tools or methodologies developed by the competent authority to provide an estimation of the own funds required to cover risks or elements of risks not covered by Regulation (EU) No 575/2013.

‘Survival period’ means the period during which the institution can continue operating under stressed conditions and still meet its payments obligations.

‘Total risk exposure amount (TREA)’ means total risk exposure amount as defined in Article 92 of Regulation (EU) No 575/2013.

‘Total SREP capital requirement (TSCR)’ means the sum of own funds requirements as specified in Article 92(1), points (a) to (c), of Regulation (EU) No 575/2013 and additional own funds requirements determined in accordance with the criteria specified in these guidelines to address risks other than the risk of excessive leverage.

‘Total SREP leverage ratio requirement (TSLRR)’ means the sum of own funds requirements as specified in Article 92(1), point (d), of Regulation (EU) No 575/2013 and additional own funds requirements determined in accordance with the criteria specified in these guidelines to address the risk of excessive leverage.

‘Unhedged borrowers’ means retail and SME borrowers without a natural or financial hedge that are exposed to a currency mismatch between the loan currency and the hedge currency; natural hedges include, in particular, cases where borrowers receive income in a foreign currency (e.g. remittances/export receipts), while financial hedges normally presume that there is a contract with a financial institution. ‘Viability score’ means the numerical expression summarising the supervisory assessment of a SREP element and representing an indication of the risk to the institution’s viability stemming from the SREP element assessed.

These guidelines apply from 1 January 2027.

Paragraphs 102, 103, 239, 462, 463 and 470(f) apply from 01 January 2027, except for taking

into account the risks of non implementation and evasion of targeted financial sanctions, which applies from 10 July 2027.

Title 12 applies from 11 January 2027.

The EBA Guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP) and supervisory stress testing of 18 March 2022 (EBA/GL/2022/03) and the EBA Guidelines on ICT risk assessment under the SREP (EBA/GL/2017/05) are repealed with effect from 1 January 2027. The references to the Guidelines repealed shall be construed as reference to these guidelines.