The Financial Supervisory Authority of Norway (Finanstilsynet) has published updated guidance describing how it conducts the Supervisory Review and Evaluation Process (SREP) and determines institutions’ overall risk, capital needs and supervisory measures, including Pillar 2 requirements. The guidance applies to banks, financial holding companies, credit institutions and finance companies, and replaces the SREP guidance issued on 20 December 2024. The document sets out Finanstilsynet’s SREP framework, including proportionality through SREP grouping, ongoing monitoring, assessment of business model and governance, risk-by-risk review, and scoring (1 to 4) with no automatic link to Pillar 2 calibration. It also explains the SREP feedback process to boards, publication of decisions on institution-specific capital requirements and expectations for capital headroom (Pillar 2 guidance), and appeal rights for Pillar 2 decisions (three weeks after receipt). The guidance reiterates annual ICAAP and ILAAP expectations at the highest consolidation level and board approval, with submission via Altinn (KRT 1172) preferably by 30 April and by 31 March for EU-established subsidiaries subject to European Central Bank consolidated supervision; submissions should be machine-readable. Annexes provide quantitative support tools and parameters, including a loan growth trigger above 6% annualised over two years (capped at 2% of retail and 5% of corporate loans), concentration approaches based on Herfindahl-Hirschman indices, market risk stresses including a 45% equity price fall, 30% property value shock and 25% foreign exchange shock, and Norwegian krone interest rate shock sizes for IRRBB. The package also sets out Finanstilsynet’s principles for Pillar 2 liquidity coverage ratio requirements in significant currencies (defined as more than 5% of total liabilities) from 1 January 2025, including expectations of at least 100% LCR in significant currencies and at least 50% LCR in NOK for firms with significant foreign currencies.
Norwegian Finanstilsynet 2025-12-18
Financial Supervisory Authority of Norway issues updated SREP guidance on assessing institutions’ risk and capital needs
The Financial Supervisory Authority of Norway (Finanstilsynet) has issued updated guidance on its Supervisory Review and Evaluation Process (SREP), detailing risk assessment, capital needs, and supervisory measures for banks and financial institutions. Replacing the 2024 version, it includes SREP framework specifics, feedback processes, and expectations for capital headroom and liquidity coverage ratios. It outlines submission requirements and quantitative support tools, such as loan growth triggers and market risk stress parameters.