ICAAP & ILAAP role in SREP

SREP in Bank of Slovenia
✓ Potential ‘show-stoppers’ and how to look for them
✓ New product approval or entering a new market – did the bank assess the effect on
internal capital? – potential weak link to decision making
✓ Important risk not covered within ICAAP – where to look for them: strategy, IA
report, validation reports, other reports, project management, discus with the MB
about their concerns
✓ Weak ICAAP framework because the bank heavily relays on conservative (high!)
internal capital demand (risks have to be managed and/or mitigated not only
covered with capital – for example Operational risk)
✓ Model validation is performed by the same unit that developed the model – in this
case it has to be performed by a different individual from the one that developed
the model (important that validation covers also data preparation because of ever
persisting issue of data quality)
✓ Use of different systems, methodologies, data, etc. for ICAAP/ILAAP then in ongoing
risk management – reporting, monitoring, limiting, granting
✓ Highly sophisticated or black box ICAAP/ILAAP models put to the question the
required understanding of methodologies from the MB in order to use it in decision
making
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