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SREP: What is changing?

Financial Regulation Advisory

SREP: What is changing?

In two articles published in its latest Supervision Newsletter, the ECB outlined some of the key changes under its comprehensive reform of the SREP.

Mon 09 Jun 2025

8 min read

In two articles published in its latest Supervision Newsletter, the European Central Bank (ECB) outlined some of the key changes under its comprehensive reform of the Supervisory Review and Evaluation Process (SREP).  

The reform, which follows an external review of the SREP in 2023, aims to enhance the effectiveness and efficiency of the SREP and make it more risk-based, without compromising quality. The ECB had signposted, in May 2024, that it was planning the enhancements to the SREP to start gradually in H2 2024 and be finalised for the 2026 SREP cycle.

The Supervision Newsletter confirms certain enhancements have already been implemented and that others will be implemented later in 2025. Enhancements include changes to decisions issued under the SREP, the ECB’s approach to supervisory findings and its assessment of internal capital adequacy assessment process (ICAAP) for credit institutions. We have provided below an overview of the main changes set out by the ECB.   

Changes to the format and content of SREP decisions

ECB decisions resulting from a SREP will be clearer and more strategic, with content focusing on key risks to facilitate engagement between credit institutions and supervisors. Decisions will also be presented in a more streamlined format and structure.

The changes aim to enhance transparency and help credit institutions more easily understand SREP outcomes. However, the changes are not intended to result in a change in ECB supervisory focus or a reduction in supervisory attention.

In summary, the main changes to SREP decisions are:

New approach to supervisory findings

Much of the ECB’s supervisory work consists of identifying credit institutions’ shortcomings (or “findings”) in a timely manner and requesting remedial action (or “measures”).

Previously, credit institutions have had to document the step-by-step resolution of shortcomings and remedial action and provide this detailed information to the Joint Supervisory Team (JST). The JST then had to verify each element before approving the closure of the related finding and measure, irrespective of the materiality of the issue.  

Although the ECB believes that while this process has helped improve credit institutions’ resilience over the years, it has become resource-intensive for both credit institutions and supervisors. This is why, from July 2025, the SREP will provide for a new streamlined and “tiered approach” for following up on findings and measures, focusing on the most material risks and issues.  

Under the new tiered approach:

Assessment of credit institutions’ ICAAP

During 2025, the ECB has taken steps to enhance its approach to assessing the soundness of credit institutions’ ICAAPs (and will continue to do so), emphasising its important role in the SREP. The enhancements will enable JSTs to focus on the areas that are most relevant and incorporate the ICAAP assessments fully into the SREP.

For example:

Conclusion

The ECB’s reforms should make the SREP more targeted, efficient, predictable and transparent, and it is likely to move closer to real-time supervision. However, given the focus on material risks and shortcomings, the ECB is likely to expect strong and timely actions by credit institutions to supervisory findings. Indeed, the ECB has made clear that the enhanced SREP will not mean less supervision or a “light touch” approach.

For information on how ALG can assist your institution, please contact Patrick Brandt, Partner, Dario Dagostino, Partner, Mark Devane, Partner, Ciara Brady, Senior Associate, Louise Hogan, Senior Associate, Sarah Lee, Senior Knowledge Lawyer or any member of ALG's Financial Regulation Advisory team.

Date published: 9 June 2025

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