The supervisory review and evaluation process : some observations

Abstract

Supervisory transparency has become a defining feature in today's prudential oversight. The Supervisory Review and Evaluation Process (SREP) - in application of Directive 2013/36/EU as amended by Directive 2019/878/EU - provides the core mechanism through which competent authorities assess the adequacy of licensed credit institutions' business models and profitability, internal governance and risk management, and controls related to risks to capital, liquidity and funding. In Malta, this mandate falls within the responsibility of the Malta Financial Services Authority (MFSA), whereby SREP is performed to evaluate whether institutions' internal risk frameworks are commensurate with the nature, scale and complexity of their business activities. SREP is not only a compliance exercise, but also a platform of dialogue that enables institutions to better understand their inherent and residual risk, as they navigate through the fast-changing global and regulatory landscape.