CRR/CRD Capital and Liquidity Planning (ICAAP/ILAAP)

ICAAP (Internal Capital Adequacy Assessment Process) evaluates the adequacy of an institution's capital and covers capital adequacy assessment for all material risk types. ILAAP (Internal Liquidity Adequacy Assessment Process) focuses on liquidity adequacy and analyses liquidity needs across various time horizons. Both processes are CRR/CRD requirements and are assessed by supervisors as part of SREP. ADVISORI supports banks in the integrated implementation of both processes.

The normative perspective examines whether an institution can meet its regulatory capital requirements (CET1, Tier 1, total capital ratio) over a planning horizon of at least three years — even under adverse scenarios. The economic perspective assesses economic substance based on internal risk models and mark-to-market valuations. Banks must now satisfy both perspectives simultaneously and document them consistently.

Capital adequacy assessment quantifies the capital requirement for all material risk types of an institution — including credit risk, market risk, operational risk and interest rate risk in the banking book. It is performed under both the baseline scenario and the adverse scenario and forms the basis for multi-year capital planning. ADVISORI supports methodology development and validation of the underlying models.

Adverse scenarios simulate unfavourable economic developments and their impact on capital and liquidity. In ICAAP they show capital consumption under stress; in ILAAP they show liquidity outflows during market disruptions. Supervisors expect institution-specific, plausible scenarios with a time horizon of at least three years. Results feed directly into capital planning and risk management.

We help banks build and optimise their liquidity planning in line with ILAAP requirements. This includes modelling liquidity needs across time horizons (intraday to over one year), calibrating liquidity buffers, developing funding scenarios and integrating LCR and NSFR management into the ILAAP process. The goal is robust liquidity management that combines regulatory requirements with operational needs.

The ECB expects ICAAP and ILAAP to be lived as continuous management processes — not annual compliance exercises. Key requirements include evidence-based documentation, consistent capital adequacy assessment in normative and economic perspectives, institution-specific stress tests, ESG risk integration and meaningful reporting to management and supervisory authorities. SI institutions must also observe the advanced reporting deadline.

A typical project starts with a gap analysis assessing the maturity of existing ICAAP/ILAAP processes. Based on this, we develop an action plan for methodology, data quality, stress testing and reporting. Implementation is iterative — from capital adequacy assessment through adverse scenarios to the final ICAAP/ILAAP documentation. We also support communication with supervisors and the SREP process as needed.