meta_id 3327338

On July 15 2026, the European Central Bank (ECB) published the Guide to the Internal Capital Adequacy Assessment Process (ICAAP), establishing supervisory expectations for credit institutions supervised under the Single Supervisory Mechanism (SSM). The guide applies to all significant institutions as defined under the SSM Framework Regulation and provides transparency on how the ECB assesses compliance with Article 73 of the Capital Requirements Directive (CRD IV). The guide establishes seven core principles governing sound ICAAP implementation. Management bodies must approve all key ICAAP elements and produce annual capital adequacy statements demonstrating their understanding of capital adequacy drivers and vulnerabilities. The ICAAP must integrate into overall management frameworks, linking business strategy, risk appetite, capital planning and decision-making processes. Institutions must assess capital adequacy from two complementary perspectives: a normative perspective ensuring compliance with regulatory and supervisory capital requirements over a medium-term horizon; and an economic perspective ensuring risks are covered by internal capital based on economic value considerations. All material risks must be identified through a comprehensive annual process and documented in an internal risk inventory. Institutions must define high-quality internal capital using prudent and conservative methodologies, with risk quantification approaches subject to independent internal validation. The guide emphasises that institutions should apply conservatism levels comparable to Pillar 1 internal models when quantifying risks. Stress-testing programmes must cover both perspectives, incorporating severe but plausible adverse scenarios reflecting institution-specific vulnerabilities, with reverse stress testing conducted at least annually. The ECB expects institutions to maintain robust capital plans covering at least three years, monitor capital adequacy indicators quarterly and adjust strategies when economic capital falls below internal thresholds. The guide clarifies that proportionality applies to implementation but cannot undermine ICAAP effectiveness. Institutions are encouraged to reference complementary guidance from the European Banking Authority (EBA) and international bodies including the Basel Committee on Banking Supervision (BCBS).