European Central Bank Banking Supervision published an update on its ongoing reform of the Supervisory Review and Evaluation Process (SREP), setting out measures to simplify supervisory processes while keeping the focus on key risks. The update covers a new format for SREP decisions and a more risk-based approach to following up supervisory findings and measures. Banks will receive draft SREP decisions in a new streamlined format in summer 2025, with decisions intended to be clearer and more strategic by focusing on strategic risk drivers and the key supervisory concerns underpinning quantitative and qualitative measures, rather than comprehensive lists of findings. The decision letters will primarily cover severe SREP findings and measures from other supervisory processes that require escalation, and will focus on weaknesses with material impact on scores and/or requirements, including Pillar 2 requirements, without repeating matters already addressed through other supervisory acts. Coverage of subsidiaries and parent financial holding companies will be shortened, qualitative requirements and recommendations will be placed in annexes, and each decision will include a link to outstanding measures; the separate “executive letters” previously accompanying SREP decisions will be discontinued. Supervisory dialogue meetings will continue but will run from June to mid-July. From July 2025, Joint Supervisory Teams will implement a “tiered approach” to findings and measures, focusing supervisory follow-up on higher-severity F3 and F4 findings (and the aggregation of F2 findings) while placing responsibility for closing lower-severity F1 and F2 findings on banks through internal governance. For F1 and F2 items, follow-up letters will include a standardised “reminder to comply” measure with a default deadline of 12 months unless otherwise agreed, with no routine submission of evidence to supervisors; evidence must be retained for five years and may be subject to sample checks. Around the end of the year, banks will be informed how open findings and measures under the previous approach will be migrated to the new system.
European Central Bank - Banking Supervision 2025-05-14
European Central Bank Banking Supervision streamlines SREP decision letters and introduces tiered follow-up for supervisory findings
The European Central Bank Banking Supervision announced updates to the Supervisory Review and Evaluation Process (SREP) to simplify processes and focus on key risks. The reform introduces a streamlined format for SREP decisions, emphasizing strategic risk drivers and severe findings, while discontinuing separate executive letters. From July 2025, a tiered approach will be adopted, with Joint Supervisory Teams focusing on higher-severity findings and banks managing lower-severity issues through internal governance.