FAQ on how we streamlined the SREP

Last updated on 24 August 2026

Why did we review the SREP?

The landscape in which ECB Banking Supervision operates is constantly changing, with structural shifts, outside shocks and new risks creating an environment of high uncertainty. To continue delivering on our mandate to keep Europe’s banks safe and sound, in 2024 we reviewed our regular health check for banks – the Supervisory Review and Evaluation Process (SREP). The overarching goal was to enhance its efficiency and effectiveness, taking into account feedback from the Expert Group’s review of the SREP and a report published by the European Court of Auditors as well as feedback from other stakeholders on how to streamline the SREP.

What did we aim to achieve by reforming the SREP?

The reform introduced simpler, more flexible supervisory processes and a shorter SREP timeline. It also aims to foster and maintain a supervisory culture that focuses more intently on key risks, promotes bank-specific qualitative judgement and encourages strong, timely action when needed. Finally, the changes now help us communicate more clearly with the banks we supervise and make our work more efficient, transparent and predictable.

How have we changed the SREP?

• More focused risk assessment: We have increased the flexibility granted to supervisors to prioritise and focus their assessments on key risks. Supervisors now employ a multi-year assessment approach which allows them to review all relevant risks in depth over a multi-year period, in line with the risk tolerance framework, rather than reviewing all risks every year. This flexible approach enables our Joint Supervisory Teams (JSTs) to allocate resources more efficiently, without weakening our supervisory standards.
• Better integration of supervisory activities: We have strengthened the way we integrate the planning of on-site inspections, deep-dive analyses and horizontal thematic reviews to deliver a structured and comprehensive view of banks’ risks. Improved planning processes for supervisory activities can maximise synergies and help banks gain a clearer understanding of supervisory priorities.
• Using the full supervisory toolkit: We are enhancing our escalation framework to encourage supervisors to use the full set of supervisory tools when deficiencies are not promptly remediated. The toolkit includes binding qualitative requirements and enforcement and sanction measures, among other things.
• Enhanced communication: SREP decisions now directly address key risks and supervisory expectations. We’ve revised our guides such that, if assessments show no material changes in the risk profile of a bank and no new requirements need to be issued, SREP decisions can be updated less frequently than yearly.
• A more stable methodology: We have simplified our supervisory methodologies and made them more stable: updates to the SREP manual are now less frequent, with changes grouped and released together only in specific years, to avoid introducing new elements every year. A stable methodological framework also ensures consistency of SREP assessments over time. This makes supervision more predictable for banks and means that SREP outcomes can be more accurately benchmarked over time and across institutions.
• Better use of IT systems and analytics: our ongoing digital agenda includes large-scale investment in IT systems and data analytics with a view to rolling out advanced technologies such as generative AI to support supervisors in routine tasks.

How have we changed the SREP timeline?

The SREP timeline was optimised in 2025. The process now concludes by the end of October each year, which is earlier than before the adjustments were implemented. As well as ensuring that banks are notified of final SREP decisions in good time, the changes are aligned with the efficiency goals under the SREP reform initiative and make supervision more effective.

Key milestones:

• The supervisory dialogue meetings start in late June and finish by mid-July. This timetable requires banks to make any necessary adjustments to their planning and prepare efficiently to allow for meaningful supervisory discussions.
• The hearing period begins in early August. As this coincides with the summer holiday period, the right to be heard was extended from two to four weeks, until the end of the month, to provide more time for banks to review draft SREP decisions and to exercise their right to be heard.
• The final SREP decisions are notified by the end of October compared with December before the reforms. Supervisors are committed to reducing their time-to-decision, which also serves to support and improve the planning of the following supervisory cycle.

How have we improved the SREP decision template?

The SREP decisions are now more streamlined, focusing on the most important risks and supervisory measures so that supervisory concerns are conveyed clearly to banks.

The format of SREP decisions was revised to improve clarity and focus. Key concerns and applicable requirements are now spelt out in dedicated sections of the SREP decision. Qualitative requirements and recommendations are presented in an annex, enabling banks to quickly identify key actions while still having access to a thorough explanation of supervisory expectations. Banks are in any case reminded that they need to follow up in good time on any supervisory actions communicated throughout the year.

This improved format enhances transparency and helps banks understand their SREP outcomes. It does not mean a change in supervisory focus or reduced supervision. As a result of this revised format, we discontinued the use of “executive letters” as documents accompanying SREP decisions. The supervisory dialogue meetings complement this communication, providing further details that banks are encouraged to share with their boards.

How did we change our follow-up on supervisory findings?

We developed a new tiered approach to the way we follow up on supervisory findings and measures. This approach helps supervisors focus on the most significant issues and more easily handle the follow-up on low-severity findings. This means that:

• Less severe findings (all F1 and most F2 findings) are addressed by default in the form of “reminders to address” (recommendations) or internal model investigations-related “reminders to comply” (obligations). To remediate these findings, banks simply need to confirm that they have taken sufficient action to ensure compliance, which means that they do not need to submit further documentation. They do, however, need to retain for a period of five years all evidence proving that these issues were properly addressed for possible future ex post spot checks. The measures for F1 and F2 findings include standardised wording and a default deadline, unless the JST decides otherwise.
• For severe findings (F3 and F4), JSTs continue their routine monitoring.
• Our external portal allows banks to access the status of all findings and measures at any given time and to self-certify closure for tiered approach measures.

Banks are responsible for addressing their low-severity findings by following an appropriate internal governance procedure. JSTs do not actively scrutinise how banks have addressed these findings but may perform random spot checks. Should any discrepancies come to light regarding the remediation status, JSTs take these into account in their ongoing assessments and may, where appropriate, formulate new specific findings. Depending on the nature of the issue and whether it recurs, this could lead to supervisory follow-up or, in more serious cases, enforcement action.

When did the ECB start using the new Pillar 2 requirement methodology?

The revised Pillar 2 requirement (P2R) methodology was published on 18 November 2025, and the ECB began using it at the start of the 2026 SREP cycle. P2Rs based on the new methodology apply as of 1 January 2027. For more details, see our dedicated P2R web page.

What did we learn from the dry run exercise? Will capital requirements change?

We carried out a dry run in 2025 to evaluate the impact of the changes. Feedback from supervisors confirms that the new methodology is simpler and easier to apply than the previous approach and continues to ensure that P2Rs are set consistently with the SREP risk assessment. It will not change the way we review and assess the risks facing individual banks.

As the revised methodology remains closely linked to the SREP risk assessments, which reflect our supervisory view on each bank’s risk profile, we do not expect it to result in abrupt system-level changes in capital requirements. P2Rs for European banks will continue to reflect banks’ individual risk profiles and the internal controls they have in place to address the risks they face.

What does the transition to the new methodology mean for banks in practice?

The revised methodology is being applied as part of the SREP process, whose outcome remains the main channel for communicating supervisory expectations and requirements to banks. While the approach to determining P2Rs is changing, banks will continue to receive clear insights into how individual risk assessments contribute to the final outcome.

The new methodology makes it easier for banks to understand and act on Pillar 2 outcomes.

How does the revised P2R methodology incorporate the recommendations from the 2023 SREP Expert Group report?

The Supervisory Board decided to review the P2R methodology as part of the wider SREP reform, taking into account the recommendations from an independent expert group published in 2023 to make it simpler and more robust.

The revised methodology is efficient and much simpler to apply, as was confirmed in a dry run with supervisors. The SREP scores, which are a key element of our supervisory methodology, remain the starting point of the P2R determination. The new methodology continues to ensure that material risks not covered, or not sufficiently covered, in Pillar 1 can have a very direct impact on the resulting P2R. The use of judgement remains a cornerstone of the methodology, but it is constrained and subject to review by the second line of defence.

In addition, the new P2R methodology no longer relies on ICAAP data. However, the assessment of the ICAAP’s soundness continues to feed into the SREP assessments of business models, internal governance, risk controls and overall risk management, meaning that it can have an impact on capital requirements. This addresses Recommendation 2.3 from the 2023 Expert Group report in particular.

Furthermore, the new methodology will enable P2Rs to be influenced more directly if potentially long-standing weaknesses, such as those related to internal controls or governance issues, are not resolved promptly and other supervisory measures prove to be insufficient, in line with Recommendation 3.2 set out by the Expert Group.