Regulatory Alerts2021-09-03 | BSD/DIR/PUB/14/063Revised Guidelines on Supervisory Review Process of Internal Capital Adequacy Assessment Process (SRP/ICAAP)
The Central Bank of Nigeria (CBN) has updated its supervisory review process for banks' Internal Capital Adequacy Assessment Process (ICAAP) to align with Basel III standards and enhance risk management. The ICAAP requires banks to assess their risk exposures and estimate their internal capital requirements, while the Supervisory Review and Evaluation Process (SREP) involves the CBN reviewing and assessing banks' ICAAPs, analyzing their risk profiles, and taking remedial measures if needed. The guidelines outline the features of the ICAAP, including comprehensive risk identification, sound capital assessment, stress testing, and monitoring and reporting. The CBN expects banks to consider the interaction between their ICAAP and the Risk-Based Supervision framework and to ensure coherence with their Recovery and Resolution Plans. The SREP includes an assessment of banks' risk profiles, the adequacy of their capital, and any necessary supervisory responses. The CBN may impose higher Pillar 2 capital requirements and can intervene early to prevent inadequate capital levels.