On 17 April 2023, the European Central Bank (ECB) published a report containing the results of an external assessment of the Supervisory Review and Evaluation Process (SREP), which includes recommendations to make the SREP more efficient and effective.

The report of the assessment was drafted by a group of independent experts.

The report:

  • Confirms that since 2014, ECB banking supervision has successfully established itself as an effective and respected supervisor and integrated a wide variety of national supervisory approaches thanks to its detailed methodologies.
  • Finds that the organisation is now sufficiently robust and mature to makes processes leaner and enhance risk-based prioritisation, which would allow greater freedom to rely on supervisory judgement.
  • Acknowledges that European banking supervision has made good progress in ensuring that banks maintain sufficient capital levels and notes that the current level of capital requirements for supervised banks looks broadly adequate.
  • Invites the ECB to reform risk scores and the process of determining Pillar 2 capital requirements.
  • Recommends that the ECB make full use of all the instruments in its toolbox, including impactful qualitative measures encouraging banks to tackle weak business models and governance practices.

The ECB’s Supervisory Board will continue to strengthen supervisory practices and will evaluate the report’s input as part of a review of supervisory processes planned for 2024.