Internal capital adequacy approach

In the second quarter of 2018, BaFin will publish its fundamentally revised guidelines for the assessment of banks’ internal capital adequacy approaches. Since the publication of the existing guidelines in December 2011, there have been significant changes in the structure and practice of European supervision as a result of the Single Supervisory Mechanism (SSM) and the new duties and responsibilities of the ECB, as well as the EBA's guidelines on the supervisory review and evaluation process (SREP). These changes have also had a major effect on the Internal Capital Adequacy Assessment Process (ICAAP).

Focus on LSIs

The revised guidelines take appropriate account of the circumstances and assessment criteria within the SSM. They are aimed solely at the less significant institutions (LSIs) in Germany, which are subject to direct supervision by BaFin. The content of the guidelines is based on the ECB's expectations for significant institutions (SIs) which will be used as a future benchmark for less significant institutions. The guidelines comply with the principle of proportionality as far as the detailed structure of the ICAAP for LSIs and their supervisory assessment are concerned.

The new guidelines prepare the way for the procedure developed by the ECB for the assessment of ICAAPs within the SSM. However, it will still be permitted to continue with the existing ICAAP approach until further notice, if it means that those elements of risk coverage potential that are necessary to comply with the mandatory regulatory capital requirements (including the SREP add-on) are not reflected in the internal capital adequacy approaches (old-style going concern approaches). The relevant requirements that previously formed part of the old guidelines can now be found in the annex to the new guidelines.