FAQ on the SREP of tomorrow

Last updated on 18 November 2025

Why did we review the SREP?

The landscape in which ECB banking supervision operates is changing, with structural shifts, outside shocks and new risks creating an environment of high uncertainty. To continue delivering on the mandate to keep Europe’s banks safe, we reviewed our regular health check for banks – the Supervisory Review and Evaluation Process (SREP) – 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 all stakeholders on how to streamline the SREP.

What did we aim to achieve with the SREP review?

The reform aims to achieve simpler, more flexible supervisory processes and a shorter SREP timeline. They also aim 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 will help us communicate more clearly with the banks we supervise and make our work more efficient, transparent and predictable.

How are we changing the SREP?

• More focused risk assessment: increasing the flexibility granted to supervisors to prioritise and focus their assessments on key risks. Supervisors will employ a multi-year approach which allows them to review in-depth all relevant risks over a multi-year period, in line with the risk tolerance framework, rather than reviewing all risks every year. This flexible approach will allow Joint Supervisory Teams (JSTs) to allocate resources more efficiently, without weakening our supervisory standards.
• Better integrating supervisory activities: in the new SREP, strengthening the integration of planning of on-site inspections, deep-dive analyses and horizontal thematic reviews to deliver a structured and comprehensive view of banks’ risks. By improving the planning process of supervisory activities, synergies are maximised, and banks gain a clearer understanding of supervisory priorities.
• Using the full set of supervisory tools: thereby enabling more effective and timely escalation when deficiencies are not promptly remediated. These include binding qualitative requirements and enforcement and sanction measures, where necessary.
• Enhancing communication: SREP decisions directly address key risks and supervisory expectations. If assessments show no material changes in the risk profile of a bank, SREP decisions can be updated less frequently than yearly.
• Making methodology more stable: simplifying supervisory methodologies and making them more stable. Stable methodologies ensure consistency over time, making supervision more predictable for banks and improving benchmarking.
• Better use of IT systems and analytics: the ECB’s digital agenda entails investments in IT systems and data analytics from 2024 to 2028, incorporating advanced technologies such as generative AI to support supervisors in routine tasks.

How are we changing the timeline of the SREP?

The SREP 2025 timeline has been optimised, and the process will conclude by the end of October – earlier than in past years. As well as ensuring that banks will be notified of final SREP decisions in good time, the changes are aligned with the SREP reform initiative’s efficiency goals and will make supervision more effective.

Key milestones include the following:

• The supervisory dialogue meetings are scheduled to start in late June and finish by mid-July. This new schedule requires banks to make any necessary adjustments and prepare efficiently to allow for meaningful supervisory discussions.
• The hearing period is set to begin in early August. Recognising the summer period, the right to be heard is extended from two to four weeks, until the end of the month, providing more time for banks to review draft SREP decisions and to exercise their right to be heard.
• The final SREP decisions will be notified by the end of October (compared with December in the previous cycle). Supervisors are committed to reducing their time-to-decision, supporting and improving the planning of the following supervisory cycle.

If assessments indicate that there are no significant changes in an institution’s risk profile and no changes to the existing measures are deemed necessary, SREP decisions may be updated on a less frequent basis under certain conditions. Previously applicable to a limited number of banks, this approach will now be expanded.

This approach balances effective, timely communication with procedural diligence, ultimately facilitating a faster, more responsive supervisory process.

How are we improving the SREP decision template?

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

The format of SREP 2025 decisions was revised to improve clarity and focus. Key concerns identified and applicable requirements will be spelled out in dedicated sections of the new SREP decision. Qualitative requirements and recommendations will be 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 new format aims to enhance transparency and to streamline and facilitate banks’ understanding of their SREP outcomes. It does not mean a change in supervisory focus or reduced supervision. As a result of this revised format, we will discontinue the use of “executive letters” as accompanying documents to SREP decisions. The supervisory dialogue meetings will complement this communication, providing further details that banks are encouraged to share with their Boards.

How are we changing our follow-up on supervisory findings?

We have developed a new tiered approach to our follow-up on supervisory findings and measures. This approach will help 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) will be 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 will simply need to confirm that they have taken sufficient action to ensure compliance and therefore will not need to submit further documentation. They will, however, need to retain all evidence proving that these issues were properly addressed for a period of five years for possible future ex post spot checks. The measures for F1 and F2 findings will include standardised wording and a default deadline, unless the JST decides otherwise.
• For severe findings (F3 and F4), JSTs will continue their routine monitoring.
• Our external portal will allow banks to access the status of all findings and measures at any given time.

Banks will be responsible for addressing their low-severity findings by following an appropriate internal governance procedure. JSTs will 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 will take these into account in their ongoing assessments and may, where appropriate, formulate new specific findings. Depending on the nature and recurrence of the issue, this could lead to supervisory follow-up or, in more serious cases, enforcement action.

What has happened since the last communication on the revised Pillar 2 requirement methodology?

Since the last time we communicated publicly about the revised Pillar 2 requirement (P2R) methodology in March this year, many things have happened. We have performed a dry run with all JSTs to confirm that the methodology achieves the objectives of simplification and efficiency, as well as higher risk sensitivity to Pillar 2 risks, i.e. those risks not covered or not sufficiently covered in Pillar 1. The results of the dry run were satisfactory, and the methodology will be implemented in the 2026 SREP cycle.

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

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, reflecting our supervisory view on each bank’s risk profile, we do not expect it to result in abrupt changes in capital requirements for the system. Pillar 2 capital requirements for European banks will continue to reflect banks’ individual risk profiles and the internal controls they have in place to address these risks.

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

The revised methodology will be 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 transition to the new methodology will make it easier for banks to understand and act on Pillar 2 outcomes.

When will the new Pillar 2 requirement methodology be implemented?

The ECB will apply the new methodology from the 2026 SREP cycle. More details on the revised P2R methodology have recently been published here. P2Rs based on the new methodology will take effect as of 1 January 2027.

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 the biggest strength of our supervisory methodology, remain the starting point of the P2R determination and 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 pillar 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, and hence 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 Pillar 2 capital requirements 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 of the Expert Group.