The European Central Bank has published a working paper by Gabriel Bobeică and Silviu Oprică examining how supervisory judgement affects euro area banks’ overall Supervisory Review and Evaluation Process scores and Pillar 2 capital requirements. In the paper, whose views are those of the authors rather than the ECB, the authors find that judgement is a material part of supervisory outcomes rather than a marginal overlay to mechanical scoring. Supervisors appear to adjust the weight of underlying SREP components to smooth fluctuations in final scores, while also giving certain risks, especially credit risk, a more decisive role in viability assessments. Using supervisory data covering nine SREP cycles from 2016 to 2024, the study finds that changes in supervisory judgement contributed almost as much as the automatic score to changes in the overall SREP score, accounting for 41% of upgrades and 47% of downgrades on average over 2017 to 2024, excluding 2020. The analysis identifies a common supervisory judgement channel across the euro area, suggesting similar adjustments by supervisors in response to shared concerns such as systemic vulnerabilities or macroeconomic conditions, although a larger idiosyncratic component remains bank-specific. For Pillar 2 requirements, the paper finds that beyond explicitly prescribed drivers such as the overall risk profile and the internal capital adequacy assessment process, factors including business model assessment also helped explain changes, which the authors interpret as evidence of common supervisory judgement in P2R setting. The paper covers the 2016 to 2024 period and notes that the ECB applies a revised Pillar 2 requirement methodology from the 2026 SREP cycle, so the findings relate to the earlier framework analysed in the study.
European Central Bank 2026-05-13
European Central Bank working paper finds supervisory judgement materially shapes SREP scores and Pillar 2 capital requirements
The European Central Bank published a working paper analysing how supervisory judgement influences euro area banks’ Supervisory Review and Evaluation Process scores and Pillar 2 capital requirements under the pre‑2026 framework. Using data from nine SREP cycles, the authors find that judgement is a material driver of SREP score changes, with a common supervisory judgement channel evident across the euro area and factors such as business model assessments helping explain Pillar 2 requirement adjustments.