ECB Finalizes Guide to On-Site Inspections and Internal Model Investigations


On September 21, the European Central Bank (the “ECB“) finalized its guide to on-site inspections and internal model investigations under the single supervisory mechanism (the “SSM“).

Under the SSM Regulation (Regulation 1024/2013), the aim of ECB Banking Supervision is ensuring a detailed and thorough analysis of the supervised entities’ business and can be exercised on and off-site. On-site supervision is performed through on-site investigations or internal model investigations, as specified under Article 12 of the SSM Regulation. On-site investigations are in-depth investigations of risk, risk controls and governance. Internal model investigations are in-depth assessments of internal models used for the calculation of own fund requirements, in particular with regard to methodologies, economic appropriateness, risks, risk controls and governance.

The guide aims to provide a reference document for supervised entities and other legal entities for which an on-site inspection has been launched by the ECB. It provides a general overview of the legal and supervisory framework for the investigations, describes the process and sets out applicable principles for inspections, covering the powers of inspection teams and the rights of inspected legal entities. The guide applies to inspections conducted in significant institutions, less significant institutions and other legal entities referred to in Article 10(1) of the SSM Regulation, including third parties to whom credit institutions have outsourced functions.