This document reminds banks of the ECB's expectations for sound capital and liquidity management in line with the ICAAP and ILAAP guides published in 2018. It clarifies governance practices around submissions and key elements to include in ICAAP and ILAAP packages. Banks are responsible for determining the most appropriate approach to ensure adequate capital and liquidity assessment processes without imposing…
This document is a guide published by the European Central Bank - Banking Supervision (SSM) in July 2026. It concerns clarifications related to the internal processes for assessing capital adequacy (ICAAP) and liquidity adequacy (ILAAP) as well as the submission modalities of the associated files. The scope covers the ECB's expectations regarding governance, content, and submission of ICAAP and ILAAP, applicable to banks supervised in the euro area, consistent with the guides published in November 2018 and the EBA guidelines. The document comprises 12 pages and is addressed to banking institutions subject to the European prudential framework.
The guide clarifies the ECB's expectations concerning the internal processes for assessing capital adequacy (ICAAP) and liquidity adequacy (ILAAP) as well as the submission modalities of files to the Joint Supervisory Teams (JST). It recalls that these processes must be continuous, equipped with solid governance, with formal approvals of adequacy statements by the management body before submission. Banks must precisely describe governance, risk inventory, forward-looking capital and liquidity plans over at least three years, including regulatory and economic perspectives, with credible and robust baseline and adverse scenarios. Plans must include sensitivity analysis of capital ratios to key risk factors and provide credible and quantified management actions to maintain adequacy under stress. Dividend or share buyback distribution policies must be formalized, aligned with adequacy perspectives, and validated by the management body, with prior communication to the JST in case of material changes. The document also specifies technical submission requirements: an annual delivery by March 15 of key documents (adequacy statements, plans, models, reading manuals) and continuous submission of new or revised internal documents. Finally, it details the expected content of capital (CAS) and liquidity (LAS) adequacy statements, which must summarize conclusions, governance, methodologies, stress test results, management actions, and identified weaknesses. These clarifications aim to strengthen the quality, consistency, and transparency of ICAAP and ILAAP, without imposing new requirements but specifying expected good practices (p. 1-12).
This guide was developed to recall and clarify the ECB's expectations regarding internal capital and liquidity management, in accordance with the 2018 ICAAP/ILAAP guides and EBA guidelines. Its objective is to improve the quality and consistency of internal capital and liquidity adequacy assessment processes, as well as the quality of files submitted to supervisory authorities. It does not create new requirements but clarifies good practices to adopt, notably regarding governance, content of forward-looking plans, risk management, stress tests, and distribution policies. The guide is addressed to banks supervised by the ECB within the Single Supervisory Mechanism (SSM). It also specifies the technical submission modalities of ICAAP/ILAAP information within the prudential review process (SREP). The scope excludes any prescription of specific approaches, leaving banks responsible for adapting processes to their own characteristics (p. 1-2, 6-7).
Governance and continuous processes: ICAAP and ILAAP must be ongoing processes, with solid governance including formal approvals and documented regular reviews. Capital and liquidity adequacy statements must be validated by the management body before submission, while other documents do not require systematic re-approval (p. 1-2).
Risk inventory and plan governance: Banks must describe the governance of capital, liquidity, and funding plans, including roles of involved functions, update frequency, and rapid adaptation modalities in case of unforeseen events (e.g., macro-financial, geopolitical developments). A comprehensive risk inventory and risk profile assessment according to regulatory and economic perspectives are required (p. 2-3).
Forward-looking capital and liquidity planning: Plans must cover at least three years, with regulatory projections (fully loaded and transitional figures) and economic ones, integrating robust and credible baseline and adverse scenarios, justified by assumptions consistent with macroeconomic consensus. Banks must analyze the sensitivity of capital ratios to key risk factors and explain methodologies translating scenarios into financial and regulatory impacts. The economic approach is expected for fine risk management and strategic decisions, notably on distributions (p. 3-5).
Distribution management and management actions: Plans must include credible management actions (capital increase, deleveraging, securitization) with feasibility and impact evaluation. Distribution policies (dividends, buybacks) must be formalized, approved by the management body, aligned with adequacy perspectives, and communicated to the JST before publication. Banks must be cautious about interim distributions and respect prior notification rules for reductions of capital instruments (p. 5).
Technical submission modalities: Annual submission of key documents (adequacy statements, plans, models, manuals) must occur by March 15, complemented by continuous submission of new or revised internal documents. A reading manual must accompany files to facilitate evaluation, specifying submitted documents, their status, major changes, and non-applicable elements. Electronic submission is done via established channels, respecting regulatory application levels and possible exemptions (p. 6-9).
Expected content of files: Banks must provide detailed information on risk measurement methodologies, differences between regulatory requirements and ICAAP, as well as on internal capital and its reconciliation with regulatory capital. Capital (CAS) and liquidity (LAS) adequacy statements must summarize governance, methodologies, stress test results, management actions, identified weaknesses and their treatment, as well as integration of ICAAP/ILAAP into management and decision processes (p. 9-12).
Established facts:
- ICAAP and ILAAP must be continuous processes with formal governance and documented approvals, notably for adequacy statements (p. 1-2).
- Forward-looking plans must cover at least three years, integrate regulatory and economic perspectives, and include credible scenarios based on macroeconomic consensus (p. 3-5).
- Banks must formalize distribution policies aligned with adequacy perspectives and communicate any material changes to the JST before publication (p. 5).
- Annual submission of key documents is set for March 15, complemented by continuous submission of new or revised internal documents (p. 6-9).
Assumptions and interpretations:
- The ECB considers that ICAAP/ILAAP quality can be improved through better consistency and transparency, notably via concise and complete adequacy statements (p. 10-12).
- Integration of the economic perspective is essential for proactive risk management and strategic decisions (p. 3-5).
Uncertainties:
- Effective implementation of good practices depends on each bank's adaptation to its specific profile and context, without rigid prescriptions (p. 1, 6).
- The impact of future regulatory and macroeconomic developments on ICAAP/ILAAP remains to be monitored (p. 3, 10-12).
The ECB recommends banks strengthen the quality and consistency of their ICAAP and ILAAP by adopting the presented clarifications. It emphasizes the importance of solid governance, complete and up-to-date documentation, and forward-looking planning integrating regulatory and economic perspectives with credible scenarios. Distribution policies must be formalized, aligned with adequacy perspectives, and validated by the management body, with prior communication to the JST in case of significant changes. File submission must respect annual deadlines and the continuous submission procedure to ensure effective supervision. Finally, capital and liquidity adequacy statements must clearly summarize conclusions, methodologies, management actions, and identified weaknesses. These measures aim to improve transparency, robustness, and banks' capacity to manage their risks and capital/liquidity sustainably (p. 1-12).
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