SREP capital ratios and due process

Abstract The introduction of the Single Supervisory Mechanism (SSM) and the resulting transfer of prudential bank supervisory competences to the European Central Bank (ECB) has led to material changes in the European financial supervisory landscape. One of the ECB’s key supervisory tools is the supervisory review and evaluation process (SREP). On the basis of the outcome of this process, the ECB requires significant credit institutions to hold additional own funds. This article describes and analyses the ECB’s handling of this significant regulatory tool and identifies weaknesses in applicable due process requirements.