On 16 January 2025, the European Banking Authority (EBA) issued its Peer Review on the application of proportionality under the Supervisory Review and Evaluation Process (SREP).
Proportionality is an important part of the SREP enabling Member State competent authorities (NCAs) to adapt the scope, frequency and intensity of the supervisory engagement and the risk assessment with regard to the nature, scale and complexity of the risks of an institution.
The EBA’s Peer Review covered the following Member State competent authorities: ACPR FR, BaFin DE, CSSF LU, KNF PL, MNB HU, and ECB.
The Peer Review found that proportionality in the SREP and in the liquidity assessment under the SREP is largely implemented by the NCAs under review though with some adaptations to the local context and the risk profile of the institutions under their supervisory remit. Certain best practices were also identified including using benchmarking tools such as for the main key risk indicators per business model, and such as for the internal liquidity adequacy assessment process (ILAAP) allowing for focused assessments and horizontal reviews of the data using a range of horizontal and bank-specific analysis tools to facilitate the assessment of the reported ILAAP information.