What is the Icaap process?

What is the Icaap process?

The Internal Capital Adequacy Assessment Process (ICAAP) allows firms to assess their capital adequacy and requires them to have appropriate risk management techniques in place. This process is summarised in the ICAAP document which should be completed by firms on a regular basis.

What does Icaap stand for?

ECB Guide to the internal capital adequacy assessment process (ICAAP) Page 1. ECB Guide to the internal. capital adequacy. assessment process.

What is Icaap document?

The ICAAP Document would be a comprehensive Paper furnishing detailed information on the ongoing assessment of the bank’s entire spectrum of risks, how the bank intends to mitigate those risks and how much current and future capital is necessary for the bank, reckoning other mitigating factors.

Why do banks need Icaap?

The ECB considers the internal capital adequacy assessment process (ICAAP) to be a key risk management instrument, which allows banks to assess the risks they are exposed to in a structured manner, and which is thus of paramount importance for improving banks` resilience.

How do I write an Icaap?

It should include a brief description of the review, challenge and approval process of the ICAAP. It should also provide details of the relevant policies and systems used by the Firm to identify, manage, and monitor its risks according to its risk appetite.

What are the parts of Icaap?

A rigorous ICAAP has six main components:

• Senior management oversight.
• Sound capital assessment and planning.
• Comprehensive assessment of risks.
• Stress testing.
• Monitoring and reporting.
• Internal control review.

Is Icaap a regulatory requirement?

The ICAAP supplements Pillar 1’s minimum regulatory capital requirements; it considers a broader range of risk types and the bank’s risk- and capital-management capabilities. At the center of most banks’ ICAAP are their internal risk models.

Is Icaap mandatory?

2.1 A firm must carry out an ICAAP in accordance with the PRA’s ICAA rules. These include requirements on the firm to assess on an ongoing basis the amounts, types and distribution of capital that it considers adequate to cover the level and nature of the risks to which it is or might be exposed.

What is Icaap regulation?

Definition. ICAAP is an abbreviation of Internal Capital Adequacy Assessment Process, a set of activities and processes that must be undertaken by regulated financial institutions in compliance with the Basel II regulatory framework.