As a key determinant of bank solvency and therefore a critical component of financial system stability, a banking applicant’s capital assessments receive significant scrutiny from regulators as part of the application process.

Alongside the Regulatory Business Plan (RBP), The Internal Capital Adequacy Assessment Process (ICAAP) is therefore one of the most important pieces of work you will need to perform in the run up to receiving your authorisation, and thereafter on an on-going basis.

What is the ICAAP and why is it so important to our application for a banking licence?

The ICAAP is an internal, risk-based assessment of capital requirements and resources for the proposed business, and is expected to evidence that the applicant has:


A review of the ICAAP is a cornerstone of the Supervisory Review and Evaluation Process (SREP) undertaken by PRA/FCA.

What is the typical ICAAP development process?

The following graphic outlines our understanding of the ICAAP development process for applicants:


What should you watch out for in developing your ICAAP?

From our experience of ICAAPs across bank business models, the following key messages stand out:

  • Ensure that the ICAAP details how risks have been identified and assessed, including articulation of the risk taxonomy and prioritisation of individual risks given the business model;
  • Ensure the ICAAP demonstrates appropriate quality and quantity of available capital through the mobilisation period to cover the minimum requirements and buffers, ongoing costs and staffing costs until additional funds have been raised;
  • Forecast Pillar 1, 2A and 2B over a period of 5 years;
  • Differentiate Pillar 2A and Pillar 2B over a 5 years forecast period;

Here are a few questions we think the Regulators are interested in getting appropriate responses to:


While it is understandable that financial projections and underlying assumptions may be subject to significant uncertainty at the application stage, there is an expectation to get the controls and risk assessment tools right from the get go.

So, what is the most important message for you?

Applicants must note that only when the regulators are sufficiently comfortable with the quality of the RBP, ICAAP and ILAAP, do they consider firms mature enough to formally apply for the banking licence.

To make sure you do it right, think scalability, think transition and think risk management for a high growth business!

For more details reach out to the authors of this blog.



Mike Williams - Partner, Financial Services Banking and Capital Markets

Mike is a Regulatory Partner specialising in leading Deloitte’s Banking and Capital Markets assignments in London, with 33 years’ experience and 19 years as a Partner working primarily with banking, investment banking, stockbroking, commodities and asset management clients across assurance, advisory, regulatory and consulting assignments. He sits as part of the Deloitte “Basel 3.5” and FRTB leadership committees, which are focussing on emerging Basel, ECB, EBA and EU financial regulatory developments.


Vishwas Khanna

Vishwas Khanna - Director, Risk Advisory

Vishwas supports start-up and non-bank financial institutions through their regulatory authorization process in the UK. Vishwas specialises in prudential regulation, ICAAPs, stress testing and risk management, with over 12 years’ experience working in the financial industry. Vishwas also leads the Deloitte EMEA Supervisory Review and Evaluation Process (SREP) initiative, working closely with UK and EMEA banks and investment firms on large, complex programmes. Vishwas holds professional memberships of the Institute of Directors and the Non-Executive Director (NED) Network in the United Kingdom.

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Faiza Farooq

Faiza Farooq - Senior Manager, Audit & Assurance

Faiza is a Senior Manager within the Prudential Regulation team in Deloitte’s Financial Services (Banking and Capital Markets) practice. Prior to joining Deloitte in November 2017, Faiza spent over six years with the UK financial regulator (firstly the FSA, then the PRA) as a firm supervisor and latterly as a technical specialist on capital and credit team, specializing particularly in the challenger banks and new banks space. As part of her role she reviewed ICAAPs, assessed the appropriateness of Pillar 2a methodology and set capital requirements of retail banks operating in the UK.


Peter Galea

Peter Galea Assistant Manager, Risk Advisory

Peter has supported multiple banks in the risk management and regulatory space, in particular in relation to readiness for the Supervisory Review and Evaluation Process (SREP). Peter has also worked directly on supervisory engagements with the ECB. Joining the UK firm with over 6 years’ experience with Deloitte Malta, Peter supports firms in the UK banking authorisation process. Peter is a UK qualified chartered accountant (ACA – ICAEW).

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