The process for banking supervision can be envisaged as a cycle:
Lessons learned in the course of supervision and through regular quality checks are used to improve this process.
The ECB assists in developing prudential requirements for significant and less significant banks, covering issues such as:
Regulations and supervisory policies for all banks are developed through close cooperation and coordination between the ECB and other bodies such as the:
The methodologies and standards underpin the day-to-day supervision of all banks and are aimed at achieving consistent and efficient supervisory outcomes.
The ECB can issue its own regulations, guidelines and instructions on topics such as the Supervisory Review and Evaluation Process (SREP) and the notification and application procedures for supervised banks.
Supervisory Review and Evaluation Process (SREP)
Legal framework
The ECB regularly reviews and strengthens its methodologies and standards. It uses the experience gained from their practical implementation when planning supervisory activities for the forthcoming cycle based on
The ECB plans its supervisory activities through a two-step process: strategic and operational planning.
The strategic plan defines priorities for the supervisory work over the following 12 to 18 months in the light of:
Strategic planning frames the nature, depth and frequency of activities set out in the individual Supervisory Examination Programmes (SEPs).
Day-to-day supervision is defined in SEPs for each bank, setting out the main supervisory tasks and activities for the following 12 months, including:
Day-to-day supervision encompasses overall interaction with banks and the constant oversight of their activities. One of the main elements underpinning this is the Supervisory Review and Evaluation Process (SREP), based on a common set of methodologies and standards, for the ongoing assessment of the significant banks’:
The SREP is applied proportionately to both significant and less significant banks, ensuring that the highest and most consistent supervisory standards are upheld.
In addition to ongoing activities, the ECB takes ad-hoc supervisory actions, such as granting authorisations and the acquisition of qualified holdings.
Depending on the bank’s risk profile assessment, the ECB may also impose a wide range of supervisory measures.
Other ad-hoc supervisory activities include crisis management, withdrawal of authorisations and sanctions.
The ECB matches the frequency and level of its supervisory engagement to a bank’s potential impact on the financial system, its intrinsic riskiness and whether it is a parent entity, subsidiary or solo institution.