ICAAP versus SREP

In the context the Basel II regulatory framework ICAAP denotes the set of activities and processes that must be undertaken by regulated financial institutions themselves.

In addition, Pillar 2 of the framework introduced the Supervisory Review and Evaluation Processes (SREP) defining a set of mirror activities to the ICAAP process to be undertaken by regulatory authorities. The key purpose of SREP is to ensure that institutions have adequate arrangements, strategies, processes and mechanisms as well as capital and liquidity to ensure a sound management and coverage of their risks, to which they are or might be exposed, including those revealed by stress testing and risks institution may pose to the financial system.