On 11 August 2020, the European Central Bank (ECB) published a report on banks’ ICAAP practices.
The internal capital adequacy assessment process (ICAAP) has been and remains one of ECB banking supervision’s top supervisory priorities since they were first published in 2016. The report summarises the results of a structured analysis of ICAAP practices, describing the range of ICAAP practices observed in a sample of 37 banks. The analysis underlines areas where banks’ practices appear to be further developed, as well as those where the ECB is of the opinion that additional work is warranted across banks.
The ECB acknowledges that many banks have made a considerable effort towards improving their ICAAPs over recent years and also that they have made clear progress. The report also notes several ICAAP areas that are less developed, all of which merit attention as weak practices in those areas could undermine the overall effectiveness of the ICAAPs. The ECB would like to draw particular attention to the importance of a more general feature of the ICAAP, namely that of the underlying concept of continuity.