European Central Bank Banking Supervision has issued clarifications on banks’ internal capital adequacy assessment process and internal liquidity adequacy assessment process packages, restating how it expects institutions to demonstrate sound capital and liquidity management and how submissions to Joint Supervisory Teams should be organised. The document is framed as guidance on sound practices rather than new requirements under the ECB’s 2018 ICAAP and ILAAP guides. It confirms that the submission process remains split between an annual package due by 15 March and the continuous submission of relevant new or significantly revised internal documents during the year. Banks do not need to reapprove all underlying ICAAP and ILAAP documentation before submission, but capital and liquidity adequacy statements must be produced, agreed and signed by the management body before they are sent. The clarifications focus on governance, forward-looking assessments and capital management decisions. Banks are expected to treat ICAAPs and ILAAPs as continuous processes supported by documented governance, risk inventories and plans that are updated promptly after material unforeseen developments. Forward-looking assessments should cover both the normative and economic perspectives for at least three years under baseline and adverse scenarios, with clear justification of assumptions, sensitivity analysis and stress testing that reflects institution-specific vulnerabilities and downturns at least as severe as official consensus downside forecasts. The ECB also reiterates that banks should document the eligibility of internal capital components, noting that Additional Tier 1 instruments usually do not pass that test, and should show how economic value considerations and unrealised losses are reflected in capital management. Capital plans should describe credible management actions and their quantified effects, while distribution policies should be formally approved, aligned with forward-looking capital positions, discussed with Joint Supervisory Teams before any material policy change or specific distribution plan is published, and expressed for ordinary payouts as a percentage of profits rather than an absolute amount.
European Central Bank - Banking Supervision2026-07-15
European Central Bank Banking Supervision clarifies ICAAP and ILAAP expectations, confirms 15 March annual and continuous package submissions
European Central Bank Banking Supervision issued clarifications on ICAAP and ILAAP governance, content and submissions, stressing that the note refines existing expectations rather than creating new ones. It confirms an annual 15 March package plus continuous updates, requires management-body-signed capital and liquidity adequacy statements, and highlights expectations on three-year forward-looking assessments, management actions and distribution policies.