On July 20, 2018, following a consultation between October 2017 and January 2018 on a package of revisions to certain of its Guidelines, the EBA published three final reports and revised Guidelines aimed at strengthening the Pillar 2 framework.
The revised Guidelines have been prepared in line with the EBA's April 2017 Roadmap for revisions of the Pillar 2 framework, to keep the SREP Guidelines that were published in December 2014 (and in force from January 2016) up to date with respect to the EU and international standards. The EBA also aims to promote best supervisory practices and address issues identified in the EBA's ongoing work on assessment of supervisory convergence. The three final reports cover:
- Guidelines on common procedures and methodology for Supervisory review and Evaluation Process (SREP). The revisions reflect external developments affecting the SREP framework since its introduction in 2014. These include the use of supervisory stress testing in SREP and the wider introduction of Pillar 2 Guidance in the 2016 EU-wide stress test, the Basel Committee on Banking Supervision's revision of its framework for interest rate risk in the non-trading book ("IRRBB"), and the clarification of the EU framework for the application of the maximum distributable amount.
- Guidelines on the management of interest rate risk arising from non-trading activities. The revisions build upon the EBA guidelines published on May 22, 2015 and take account of existing supervisory expectations and practices including the Standards on interest rate risk in the banking book published by the Basel Committee in April 2016.
- Guidelines on institutions' stress testing. These revisions replace the existing 2010 Guidelines on stress testing published by the EBA's predecessor, the Committee of European Banking Supervisors. The updated Guidelines reflect developments in stress testing methodologies and usage since 2010 and reflect industry practices and the incorporation of recovery planning. The Guidelines aim to provide common organizational requirements, methodologies and processes for the performance of stress testing by institutions, including a common stress testing taxonomy and detailed guidance on the way institutions should design and conduct a stress testing program.
The revised SREP Guidelines and the stress testing Guidelines will apply from January 1, 2019. The IRRBB Guidelines will apply from June 30, 2019 with transitional arrangements for certain provisions until December 31, 2019.
The final report and Guidelines on the revised common procedures
and methodologies for the supervisory review and evaluation process
(SREP) and supervisory stress testing are available at: http://www.eba.europa.eu/documents/10180/2282666/Revised+Guidelines+on+SREP+%28EBA-GL-2018-
03%29.pdf, the final report and
Guidelines on the management of interest rate risk arising from
non-trading book activities are available at: http://www.eba.europa.eu/documents/10180/2282655/Guidelines
+on+the+management+of+interest+rate+risk+arising+from+non-trading+activities+%28EBA-GL-2018-02%29.pdf,
the final report and Guidelines on institutions' stress testing
are available at: http://www.eba.europa.eu/documents/10180/2282644/Guidelines+on+institutions+stress+testing+%28EBA-GL-
2018-04%29.pdf and the EBA's Pillar
2 Roadmap (April 2017) is available at: https://www.eba.europa.eu/documents/10180/1814098/EBA+Pillar+2+roadmap.pdf.
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