A leaner methodology for banks’ liquidity and funding risks
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Supervision Newsletter: from 2027 a revised SREP methodology will apply to liquidity and funding risks, simpler and based on three assessments.
Key points
- Three blocks: short-term liquidity, funding sustainability and risk controls (incorporating the ILAAP conclusions)
- New formula for automatic scores, tested this year by supervisory teams
- It incorporates the new version of the EBA SREP guidelines and the multi-year assessment
- Individual results will be discussed in the summer 2027 supervisory dialogue; details with the 2027 SREP results
Who is affected
Significant banks (SREP)
Deadlines
Application in the 2027 SREP cycle
Plain-language version
The ECB, the euro area's central bank and supervisor of the big banks, will change from 2027 how it checks whether banks have enough cash on hand (liquidity) and stable funding. The new method is simpler and built on three blocks. It matters because a bank short of cash cannot pay customers back on time when they ask for their money.
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