A leaner methodology for banks’ liquidity and funding risks

11 November 2026

Authors: Martin Rose, Ilze Rainska, Baudouin Guiffart (ACPR)

From 2027, SSM supervisors will use a revised methodology to assess banks’ liquidity and funding risks. The revision completes the cycle of upgrades launched in 2021 as part of the Supervisory Review and Evaluation Process (SREP) reform. Supervisors will discuss individual results obtained using the new liquidity methodology during the supervisory dialogue phase in summer 2027.

The SREP is an ongoing “health check” that Joint Supervisory Teams (JSTs) carry out for all supervised banks. The JSTs communicate individual SREP decisions or operational letters once a year. Assessing liquidity and funding risks is one of the four main elements of the SREP. These risks require close attention. If a bank cannot meet its financial obligations when they fall due, for example after an adverse shock, its viability can quickly be threatened even if it has sufficient capital.

The revised SREP liquidity methodology enables a more targeted and effective assessment of liquidity and funding risks. It incorporates recent regulatory and supervisory developments, in particular the simplifications and amendments in the new version of the European Banking Authority’s SREP guidelines. The revised methodology also incorporates insights from supervisory reviews on liquidity risk carried out in past years, such as horizontal thematic reviews and the 2019 liquidity stress-testing exercise. These insights will help inform the regular SREP assessment.

This new methodology is leaner and based on three main assessments: (i) short-term liquidity risk, (ii) funding sustainability, and (iii) risk controls. To streamline the approach, topics that were previously reviewed separately are now assessed together. For example, the findings from the banks’ internal liquidity adequacy assessment process (ILAAP) reports are now integrated into the risk controls assessment, which also reduces the number of areas requiring a score.

It will additionally help supervisory teams apply a risk-based and proportionate approach. Teams can focus on the risks that matter most for each bank while maintaining an overview of potential vulnerabilities in short-term liquidity and funding sustainability, supported by a common pool of relevant indicators. In addition, JSTs can make full use of the flexibility provided by the multi-year assessment, which now also covers this part of the SREP.

The revision additionally introduces an updated formula for calculating the automatic scores for short-term liquidity and funding sustainability. These serve as indicative starting points for supervisors when assessing the risks using their expert judgement to ensure that the score they assign reflects bank-specific features, such as business models or funding structures. A large group of supervisory teams tested the new scoring calculation earlier this year. The trial confirmed that its calibration is robust and suitable for use next year.

The indicators used for the quantitative assessment provide a dynamic, forward-looking evaluation of banks. They also show how sensitive banks may be to a hypothetical scenario of extremely stressed liquidity conditions. The metrics rely largely on existing prudential reporting. This includes key information on the contractual schedule of liquidity inflows and outflows (the “maturity ladder”), funding concentration, asset encumbrance, liquidity and funding in foreign currencies, and banks’ funding plans.

Further details on the revised methodology will be published on the ECB’s website next year, together with the 2027 SREP results. By then, banks will have had the opportunity to discuss their individual assessments with their supervisory teams over the summer.

After the revised liquidity methodology is introduced in 2027, the overall SREP methodology will remain stable until 2030, in line with the objectives of the SREP reform. Updates to the supervisory manual will be released only every three years, simplifying the tasks of both banks and supervisors.