ICAAP
Internal Capital Adequacy Assessment Process
Definition
The process through which a bank assesses and maintains adequate capital in relation to its risk profile, strategy, and business plan. ICAAP is a Pillar 2 requirement under the Basel framework, requiring firms to identify and quantify all material risks and demonstrate that they hold sufficient capital to cover them.
Regulatory Context
Supervisors review each firm's ICAAP as part of the SREP process and may impose additional capital requirements (Pillar 2 add-ons) where they identify deficiencies. The ECB and PRA publish detailed expectations for ICAAP submissions.