The SREP in detail
Past version: effective from 21/10/2015 - 20/10/2015
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3. A SREP of an IRAP and an ICAAP forms an integral part of the overall supervisory approach of the Regulator. A SREP is expected to enable assessment of the effectiveness, completeness and quality of an IRAP and ICAAP in relation to the overall risk profile of the Authorised Person. It leverages from information collected and assessments carried out as part of the wider supervisory regime, including desk-based reviews, on-site risk assessments, discussions with the firm's management, and reviews completed by internal and external Auditors.
4. The SREP is structured to provide consistency of treatment across Authorised Persons, taking into consideration the differences in risk profiles, business strategies and management. An essential element of the SREP is the qualitative assessment of each type of risk and its management within the overall context of the firm's internal governance.
5. The Regulator's assessment of the individual risk profile of an Authorised Person will provide the context for evaluation of the firm's IRAP and/or ICAAP. The evaluation in turn will be used by the Regulator to augment its understanding of the overall risk profile of a firm. Also, in relation to a firm in Category 1, 2, 3A or 5, the Regulator might involve such a firm in a formalised discussion of risks and capital adequacy, which might lead to a requirement for additional capital.
6. The SREP may be used as a regulatory tool for Authorised Persons which are required to perform an IRAP and/or ICAAP. The SREP for each Authorised Person will be proportionate in terms of the size, scale and complexity of its business and its impact on financial sector stability. The Regulator will cooperate actively with other supervisory authorities whenever an Authorised Person is part of a Group and is prudentially regulated on a consolidated basis.
7. The SREP evaluation cycle will be determined in the discretion of the Regulator and be based on the risk assessment, developments in the risk profile and changes in the Authorised Person's strategy or products. The SREP is as far as possible aligned with the risk assessment process to ensure that a recent risk assessment is available for the SREP evaluation process.
8. It is envisaged that the Regulator will use a range of supervisory tools of qualitative or quantitative nature to perform the SREP. The SREP is not intended as, and should not constitute, a parallel or secondary IRAP or ICAAP. Its purpose is to evaluate the quality, completeness and consistency of the IRAP or ICAAP of the Authorised Person.