Date: 26.06.2020EXPIRED: SREP capital determination: How will capital add-on orders (P2R) in the context of the Supervisory Review and Evaluation Process (SREP) – under section 10 (3) sentence 1 and 2 no. 1 in conjunction with section 6b of the German Banking Act (Kreditwesengesetz – KWG) taking into account the provisions of the EBA Guidelines EBA/GL/2014/13 of 19 December 2014 – be issued in 2020?
The cycle for setting and ordering the SREP capital add-on will be suspended in 2020. This means capital add-ons scheduled to be reset in 2020 will be deferred; as a result, any capital add-ons (P2R) that have already been set will remain the same in 2020. In principle, any orders relating to capital add-ons (P2R) which have not yet been set for 2019 will still be issued.
The cycle has been suspended because of the changes in circumstances as compared to the situation as at the date of the 2019 annual financial statements.
As things currently stand, the SREP capital add-ons are to be reset for all institutions in 2021 and 2022 in order to take the situation surrounding the COVID-19 pandemic into consideration in the SREP capital determination. Institutions will be divided across the years 2021 and 2022 at a later date.
For mergers during 2020, an add-on that is weighted with the total risk exposure amount (TREA) should be determined, in line with the previous procedure. In the case of capital add-ons for new businesses that are due to expire, these will, as before, receive an initial SREP decision.
BaFin will also continue to send institutions outstanding letters regarding Pillar 2 Capital Guidance (P2G) (referred to in Germany as the Eigenmittelkennziffer (equity ratio) - EMZK) based on LSI stress tests conducted in 2019.
The Deutsche Bundesbank and BaFin will make use of additional documents from the institutions, such as risk reports, in order to assess their current risk situations.
