Overview of Pillar 2 supervisory review practices and approaches

The Overview of Pillar 2 supervisory review practices and approaches describes key concepts of Pillar 2 and supervisory review practices in use across Basel Committee member jurisdictions. 

The Pillar 2 supervisory review process is an integral part of the Basel Framework. When the Committee introduced the Basel II framework in 2004, a fundamental objective of the Committee's work was to reinforce the minimum capital requirements of the first pillar with a robust implementation of the second pillar. This included efforts by banks to assess their capital adequacy and by supervisors to review such assessments. 

The report covers key areas of the Pillar 2 supervisory review process, including the risk assessment process, risk appetites, board and senior management roles and supervisory practices adopted to enhance transparency, and bank disclosure practices. The report further describes a number of selected Pillar 2 risks, including business risk and interest rate risk in the banking book. Lastly, the report presents a range of actions that are taken under Pillar 2. Case studies are included throughout the report to illustrate supervisory practices.