1.1 This supervisory statement is aimed at firms to which CRD IV [The Capital Requirements Directive (2013/36/EU) (CRD) and the Capital Requirements Regulation (575/2013) (CRR), jointly ‘CRD IV’.] applies.

1.2 The purpose of this supervisory statement is to set out the expectations that the Prudential Regulation Authority (PRA) has in relation to the Internal Capital Adequacy Assessment Process (ICAAP) and the requirements set out in the PRA Rulebook in the Internal Capital Adequacy Assessment rules.

1.3 It provides further detail in relation to the high-level expectations outlined in The PRA’s approach to banking supervision.

1.4 The PRA will review a firm’s ICAAP as part of its Supervisory Review and Evaluation Process (SREP), and this supervisory statement also sets out some of the factors that the PRA will take into consideration during the SREP.

1.5 In addition, this supervisory statement sets out the PRA’s expectations with regard to firms’ coverage and treatment of interest rate risk arising in the non-trading book, group risk and operational risk and foreign currency lending to unhedged retail and SME borrowers.