The European Banking Authority has launched a consultation on reviewing three Guidelines with the aim of strengthening the Pillar 2 framework. The consultation covers updates to the following:

1. Guidelines on common procedures and methodology for Supervisory Review and Evaluation Process (SREP Guidelines). The EBA is proposing to revise the SREP Guidelines to take into account, among other things, the use of supervisory stress testing in SREP and clarification of the European framework for the application of maximum distributable amount to address differences in the implementation of Pillar 2 Guidance. The EBA expects to be able to implement the revised SREP Guidelines by January 1, 2019 for the 2019 cycle of SREP.

2. Guidelines on the management of interest rate risk arising from non-trading activities (IRRBB Guidelines). The IRRBB Guidelines set out supervisory expectations for the management of IRRBB. The EBA is proposing to update the IRRBB Guidelines to take account of current supervisory expectations and practices, including the Standards on Interest Rate Risk in the Banking Book published by the Basel Committee on Banking Standards in 2016. Those Standards will be implemented in the EU through the EBA's updated IRRBB Guidelines and revisions to the Capital Requirements Regulation and Capital Requirements Directive. The draft revised IRRBB Guidelines cover the systems that firms must implement for identifying, evaluating and managing IRRBB, a firm's internal governance arrangements for managing IRRBB, general expectations for identifying and managing credit spread risk in the non-trading book and sudden and unexpected changes in the interest rate. The EBA intends for the revised IRRBB Guidelines to apply from December 31, 2018.

3. Guidelines on institutions' stress testing. The EBA is proposing new detailed guidance for firms designing and conducting a stress testing programme. The new Guidelines will replace the existing 2010 Guidelines on stress testing published by the Committee of European Banking Supervisors. The proposed Guidelines cover the organization of stress testing, the types of stress test exercises, the reverse stress testing process for regular stress testing and recovery planning purposes, business models, data aggregation, risk and litigation costs, FX lending risk and the interaction between solvency stress tests and liquidity stress tests. The EBA aims to finalise these guidelines during the first quarter of 2018 and intends for the application date to be in the second quarter of 2018.

The consultation on the three Guidelines is being run in parallel, with feedback on the proposals requested by January 31, 2018.

View the consultation paper on draft Guidelines on stress testing.

View the existing Guidelines on stress testing.

View the consultation paper on revising the SREP Guidelines.

View the existing SREP Guidelines.

View the consultation paper on draft Guidelines on the management of interest rate risk arising from non-trading book activities.

View the existing Guidelines on the management of interest rate risk arising from non-trading activities.

View the Basel Committee Standards on Interest Rate Risk in the Banking Book.