Large Bank Examination Workshop February 2026

ICAAP Components

1. Description of risk governance 2. Statement of risk appetite

i. Link to risk limits ii. Link to strategy 3. Comparison with risk-bearing capacity 4. Assessment of material risks 5. Comprehensive risk capital model (economic capital?) 6. Capital forecasts and stress tests, showing: i. Regulatory capital ii. Risk or economic capital iii. Physical capital iv. Available vs. required capital 7. Capital allocation process and policies 8. Use test - embedded in business processes

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Capital Forecasts

1. As the ICAAP must be forward-looking, it needs to incorporate planned capital levels 2. A fully-integrated capital forecast would be linked to the planning and budgeting process, providing forecasts for: a. Available physical (book) capital – essentially a function of profits, dividends and other capital management activities b. An adjustment of the available physical capital to reconcile to available economic capital and regulatory capital c. Required economic capital – essentially a function of forecast credit exposures, market risk limits etc. d. Required regulatory capital – essentially a function of forecast risk-weighted assets 3. Forecast requirements should be compared with forecast availability

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