European Central Bank clarifications on ICAAP and ILAAP requirements

The European Central Bank (ECB) has published a report clarifying the internal capital adequacy assessment process (ICAAP) and the internal liquidity adequacy assessment process (ILAAP), as well as the respective package submissions. The ECB reminds banks of its main supervisory expectations on sound and effective capital and liquidity management in line with the ECB Guides on ICAAP and ILAAP published in November 2018. The ECB also outlines some clarifications on the governance around the submissions and key content areas which should be reflected in ICAAP and ILAAP packages. The report notes that it remains banks' responsibility to determine and apply the most appropriate approach to ensure sound capital and liquidity adequacy assessment processes tailored to their own specificities. Therefore, the ECB's clarifications focus on sound practices instead of setting additional expectations or requirements. They should be considered by banks to refine or improve their capital and liquidity management practices. Regarding the technical details around ICAAP and ILAAP package submissions, the note "Technical implementation of the EBA Guidelines on ICAAP information collected for SREP purposes" that was sent to banks in February 2017 remains applicable and is included in the annex to the report.