[ESMA35-42-1470 ] Joint EBA and ESMA Guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP)

Following the publication of the Final Report on Joint EBA and ESMA Guidelines on common procedures and methodologies for the SREP under Directive (EU) 2019/2034 (please see EventID #16711), ESMA has published the translated Guidelines into the official EU languages on the websites.
To recall, in its consultation (please see eventid=13637 in this context), ESMA and EBA specified the procedures and methodologies for the supervisory review and evaluation of class 2 and class 3 investment firms, together with draft RTS aiming to ensure a consistent and proportionate application of supervisory practices.
The joint guidelines set out a common SREP framework based on the following four main elements – as quoted:
1. business model analysis;
2. assessment of internal governance and investment firm-wide control arrangements;
3. assessment of risks to capital and adequacy of capital to cover these risks; and
4. assessment of risks to liquidity and funding and adequacy of liquidity resources to cover these risks.
The common guidelines contain a scoring system to facilitate comparability between companies, which distinguishes between risks and viability values. In addition, they specify the use of supervisory measures as a result of the SREP assessment as well as the monitoring of key indicators, or provisions concerning the application of the SREP in a cross-border context.
The deadline for competent authorities to report whether they comply with the guidelines will be two months after the publication of the translations. The guidelines will apply on 19 June 2023.