Regulator notes progress in convergence of supervisory practices across the EU

The European Banking Authority (EBA) published today its second annual Report on the convergence of supervisory practices across the EU. The Report, which is addressed to the EU Parliament and the Council, reviews consistency in the application of the Supervisory Review and Evaluation Process (SREP) and supervisory practices in the assessment of recovery plans. The EBA’s work in supervisory convergence is designed to foster comparable approaches and consistent outcomes in applying the Single Rulebook. This is necessary for a level playing field, effective supervision of cross border groups, and to identify supervisory best practices.

The Report highlights that supervisory authorities across the EU have made additional progress on convergence of supervisory practices, also thanks to the implementation of the EBA SREP Guidelines for the 2016 SREP cycle. In particular, the EBA notes the consistent structure of various SREPs and clear articulation of additional capital requirements, mirroring the composition of minimum own funds requirements.

However, the report also identifies important differences, in particular in determining the amount of additional capital requirements and in the legal nature of such requirements. These, in combination with the application of automatic restrictions on distributions, risk different treatment of banks and investors in the Single Market.

Common rules are vital for the effective functioning of the Single Market and consistency in supervisory risk assessments and outcomes play an important role in supporting the Single Rulebook, whilst maintaining the space for proportionality and supervisory judgement that is required for effective supervision.

The EBA statement and related documents are available here.

Lavanya Rathnam

Lavanya Rathnam is an experienced technology, finance, and compliance writer. She combines her keen understanding of regulatory frameworks and industry best practices with exemplary writing skills to communicate complex concepts of Governance, Risk, and Compliance (GRC) in clear and accessible language. Lavanya specializes in creating informative and engaging content that educates and empowers readers to make informed decisions. She also works with different companies in the Web 3.0, blockchain, fintech, and EV industries to assess their products’ compliance with evolving regulations and standards.

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