EBA Escalation & Communication Structures

The new EBA escalation framework (EBA/CP/2025/21) replaces existing SREP guidelines from January

2027 and introduces a flexible, tiered escalation model. Supervisory authorities can select measures based on the severity and root cause of findings — ranging from informal dialogue through binding qualitative requirements to enforcement and sanctions. Crucially, the sequence is not a rigid sequential model but allows for situation-appropriate adaptation. Remediation governance — how quickly and effectively an institution addresses deficiencies — becomes a subject of supervisory assessment itself and influences supervisory intensity.

The revised EBA guidelines establish mandatory minimum standards for SREP result communication for the first time. Supervisory authorities must consolidate results in a formal letter to the management body containing the overall SREP score, individual assessment elements, and key risk drivers. Pillar

2 requirements must be justified on an institution-specific basis. This increases transparency but also requires financial institutions to align their internal communication structures to relay this information promptly and accurately to relevant decision-makers.

Remediation governance describes the systematic process by which a financial institution addresses supervisory findings: assigning ownership, defining milestones, verifying progress, and reporting to the management body. Under the new SREP framework, remediation governance itself becomes subject to supervisory assessment. This means how quickly and effectively an institution remedies deficiencies directly influences supervisory intensity and the choice of future measures. Institutions with weak remediation governance risk escalated supervisory actions.

Preparation for the new escalation framework comprises four core steps: (1) Gap analysis — assess existing escalation processes against the new EBA requirements, particularly the findings severity model (F1-F4). (2) Governance mapping — define clear responsibilities, milestones, and reporting lines for each escalation level. (3) Implement early warning systems — establish proactive Key Risk Indicators (KRIs) that signal potential findings early. (4) Conduct test runs and training — simulate crisis scenarios to validate functionality under stress and optimise response times.

The supervisory dialogue is being strategically enhanced under SREP 2.0. Banks will be informed earlier about supervisory concerns and potential findings. The escalation ladder provides a clear view of issue severity and the corresponding supervisory response. For financial institutions, this means proactive, structured communication with supervisors can positively influence the escalation level and improve the SREP score. ADVISORI supports the development of SREP-optimised communication strategies.

The new SREP findings severity model categorises supervisory findings into four severity levels: F

1 (minor) and F

2 (moderate) require only confirmation that remedial measures were taken — additional documentation is not required, but evidence must be retained for five years. F

3 (serious) and F

4 (critical) are subject to existing follow-up procedures with comprehensive documentation requirements and close monitoring. The correct classification determines resource allocation and the required response speed of the institution.

ADVISORI supports financial institutions with a five-phase approach: (1) Analysis of existing communication and escalation processes against the new EBA/CP/2025/21 requirements. (2) Development of a tailored concept with clear escalation levels, communication matrix, and governance structure. (3) Implementation with defined responsibilities, KRI-based early warning systems, and digitalised reporting processes. (4) Training of executives and staff for handling the new structures. (5) Continuous evaluation and optimisation — including crisis scenario testing and audit readiness checks.