1.This Standard discusses the key principles of supervisory review, with respect to banking risks, including guidance relating to, among other things, the treatment of interest rate risk in the banking book, credit risk (stress testing, residual risk, and credit concentration risk), operational risk, enhanced cross-border communication and cooperation, and securitisation.

2.Banks are only permitted to perform a Pillar I Plus approach. Internal models are not allowed in ICAAP for estimating capital requirements for credit, market or operational risk. For risk management purposes, banks may use internal models, but figures reported to the Central Bank should be based on the Standardised Approach.

3.All buffers are to be in addition to existing requirements. An off-setting of certain requirements is not permitted i.e. lower Pillar 2 for Pillar 1 risks are not allowed.

4.The type of capital which the Central Bank will require banks to provide for pillar 2 risks will be solely at the discretion of the Central Bank; this may be CET1 only, or a mix between CET1, AT1 and Tier 2.

5.It should be noted that given a normal business model the capital risk charge for Pillar 2 should always be positive if the risk exists (in particular for the IRRBB and Concentration risk).