Pillar 2 assessment approach set down

The FSA has published details of how it will judge the Internal Capital Adequacy Assessment Process (ICAAP) of firms covered by the Capital Requirements Directive (CRD). The Pillar 2 assessment or Supervisory Review and Evaluation Process (SREP) aims to ensure that firms hold sufficient capital for their risk profile over and above the minimum requirements to cover credit, capital and market risk under Pillar 1 of CRD. Any shortfall that needs to be met will be set out in Individual Capital Guidance (ICG), which will be scaled according to the FSA’s qualitative view of the firm’s oversight and governance.