SS31/15 - The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP)
Executive Summary
SS31/15 is the PRA's foundational supervisory statement establishing expectations for how UK-regulated banks and large investment firms must conduct their Internal Capital Adequacy Assessment Process (ICAAP) and how the PRA will evaluate these assessments through its Supervisory Review and Evaluation Process (SREP). This guidance is critical because it directly determines the capital requirements firms must maintain and establishes the supervisory framework through which the PRA assesses whether firms hold sufficient capital to cover material risks.
What Changed
The supervisory statement establishes several core regulatory expectations: ICAAP Requirements - Firms must assess on an ongoing basis whether they hold sufficient capital to cover all material risks, including interest rate risk in the banking book (IRRBB), market risk, operational risk, concentration risk, group risk, pension obligation risk, and foreign currency lending to unhedged retail and SME borrowers - Firms must implement stress testing and scenario analysis as integral components of capital planning - The management body must be actively involved and engaged in all relevant stages of the ICAAP process SREP Assessment Framework The PRA reviews and evaluates: - Arrangements, strategies, processes and mechanisms implemented by a firm to comply with regulatory requirements - Risks
What You Need To Do
- *Immediate Compliance Actions
- *Establish ICAAP Framework
- *Risk Identification and Assessment
- *Stress Testing and Scenario Analysis
- Results of stress tests carried out in accordance with CRR requirements for firms using IRB approaches or internal models
- Exposure to and management of concentration risk in compliance with CRR Part Four and ICAA Chapter 6
Key Dates
Compliance Impact
Urgency Rating: HIGH
Who is Affected
Summary
Supervisory statement 31/15