ECB revises approach to Pillar 2 guidance
The Pillar 2 Guidance is a bank-specific recommendation that indicates the level of capital that the ECB expects banks to maintain in addition to their binding capital requirements. It serves as a buffer for banks to withstand stress.
According to the recently published ECB communication, following the legislative updates of the Capital Requirements Regulation and the Capital Requirements Directive, for the 2021 SREP cycle, the ECB Banking Supervision will use a new two-step bucketing approach in order to determine the P2G level for each bank under its supervision. The revised approach should improve consistency and better reflect the specificities of each bank, while also remaining simple.
In this alert you will read more about how ECB Banking Supervision will use a new two-step bucketing approach and what are the steps to follow.