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The ICAAP- and SREP-process

Question:

What does the ICAAP and SREP process entail for a proprietary trader?

Published: 28 February 2024

Answer:

Based on Section 3:18a(1) of the Wft DNB periodically evaluates (in accordance with the technical criteria of Article 98 of the CRD) the business operations of investment firms within the meaning of the CRR having their registered office in the Netherlands, or that engage in investment activities in the Netherlands, and the liquidity and solvency of these firms. For this purpose, proprietary traders are obliged to submit to DNB annually on the last business day of the third quarter at the latest an Internal Capital Adequacy Assessment (ICAAP) document.

For guidance in compiling the ICAAP document, we refer you to the ICAAP Policy Rule for investment firms and investment institutions under the Financial Supervision Act (Beleidsregel ICAAP beleggingsondernemingen en beleggingsinstellingen Wft 2015, Government Gazette 2015, 21650), the supplementary guidance on ICAAP on Open Book on Supervision, as well as the European Banking Authority's Guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP). We will assess the ICAAP documents based on this guidance as well.

Besides this, we want to point out that if the investment firm is subject to consolidated supervision by DNB, both the licensed entity and its financial holding company may have capital requirements imposed based on the ICAAP/SREP process. If this applies to your firm, we would ask you submit the ICAAP risk premium document for Pillar 1 and Pillar 2, both on a solo and on a consolidated basis.

After completing the SREP, we will set a capital requirement for the investment firm (also on a consolidated basis if applicable) in our SREP decision. This capital requirement based on Pillar 2 is decided for each individual investment firm and applies until a new SREP decision is taken.