The European Banking Authority (EBA) has published a report which provides a summary of the 2016 – 17 EBA assessment of convergence of supervisory practices in accordance with Article 107 of the Capital Requirements Directive IV.

Among other things the EBA notes in the report that:

• a good degree of progress has been made by Member State competent authorities (NCAs) in the implementation of the EBA guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP Guidelines) as well as in taking forward recommendations and observations made by the EBA during its 2016 bilateral convergence visits;
• despite the good progress challenges remain primarily in the area of methodologies for the capital adequacy assessment and determining institution-specific additional own fund requirements. This is most clearly illustrated by the different approaches to using the Internal Capital Adequacy Assessment Process, the disparity between risk taxonomies, differences in the transparency of setting Pillar 2 Requirements (P2R), where it is not based on the risk-by-risk determination, and the use of P2R for macro-prudential purposes. In turn this leads to differences in the articulation and communication of P2R to supervised institutions; and
• the majority of NCAs are setting Pillar 2 guidance, albeit with divergences in approach, and convergence should increase as the NCAs start implementing the common framework for setting Pillar 2 guidance that is introduced in the revised EBA SREP Guidelines;
• the revisions to the SREP Guidelines will be finalised in 2018 and apply from 1 January 2019.

View EBA third report on convergence of supervisory practices, 21 November 2017