• Internal Capital Adequacy Assessment Process (ICAAP)

    We work in collaboration with you to ensure that your Internal Capital Adequacy Assessment Process (ICAAP) captures all material risks; contains proportionate assessments including in-depth stress testing; is subject to a robust governance process; and addresses any PRA feedback from supervisory reviews and evaluations.

Key activities

An ICAAP evaluates the amounts, types and distribution of capital that is required by a bank to cover the level and nature of the risks to which it is or might be exposed. It should be updated annually or in the event that significant changes to the bank’s business, risk profile or operating environment could make the current level of financial resources inadequate. Results must be documented in an appropriate format and submitted to the Prudential Regulation Authority (PRA). It should be updated at least annually or in the event that significant changes to the bank’s business, risk profile or operating environment could make the current level of financial resources inadequate.

To ensure that your ICAAP is in line with current regulatory guidance and industry best practices we’ve developed a comprehensive service model:

  • An ICAAP evaluates the amounts, types and distribution of capital that is required by a bank to cover the level and nature of the risks to which it is or might be exposed. It should be updated annually or in the event that significant changes to the bank’s business, risk profile or operating environment could make the current level of financial resources inadequate. Results must be documented in an appropriate format and submitted to the PRA when requested.

    • Review and analysis of your Pillar 2 capital requirement, which is not already covered under Pillar 1.

    • Stress testing based on your current position and projected three or five year business plan.

    • Macroeconomic scenario analysis based on the PRA's Bank Capital Stress Test (BCST) and PRA's scenario for banks not participating in BCST.

    • Analysis of the impact of management actions in each of the stress scenarios and evaluation of capital adequacy after management actions.

    • Capital planning evaluation under stress scenarios and identification of the Pillar 2B capital requirement.

  • Preparation of the ICAAP document based on the inputs and the outcomes of the evaluations, together with the ICAAP related regulatory returns (FSA071 to FSA082). Present to the management team to gather feedback and agree amendments before moving into the Governance phase.

  • The draft ICAAP document is showcased to the relevant management committee (e.g., Asset and Liability Committee) and Board Risk Committee. Feedback and comments are then absorbed into the final ICAAP document before being presented to your Board for the final level of governance and approval.

What we offer

  • End to end solution

    End to end solution

    We work collaboratively with your senior team and boards, tailoring our approach to your business to develop a bespoke project plan for your ICAAP and the production of a document and regulatory returns.

  • Elective services

    Elective services

    You may just require support for specific tasks, such as scenario and risk evaluation workshops, stress testing, and training on industry guidance and best practices. Whatever support you need we’d be glad to be an extension of your team.

  • Review & assurance

    Review & assurance

    You may undertake the ICAAP without external consultancy support. In this event, we will be pleased to review the inputs and outputs of the process including the ICAAP document to provide assurance that you have followed regulatory guidance and industry best practice.

Ready for your ICAAP?

Why choose us

  • Deep practical knowledge of the regulations and how to apply them proportionately for small and medium sized banks, ensuring you efficiently utilise capital and liquidity resources.

  • We’ve undertaken a significant number of ICAAPs for our clients so keep abreast of the latest PRA guidelines and industry best practices.

  • Effective project delivery with an efficient and high-quality engagement that saves you time and reduces the regulatory burden. This includes k-alm® our software as a service that includes robust, in-built stress testing models.

  • What really defines our success is the strong, strategic partnerships we form with our clients. We listen carefully to their requirements to achieve positive results and make a lasting impact. Time and again clients comment on our responsiveness and the accessibility of our senior team.

  • A professional and fit for purpose ICAAP document that has a a clear flow and structure. It assists with the management and mitigation of those risks and ensures adequate systems and controls are designed and implemented.

  • Our clients are able to use the inputs and final ICAAP document on an ongoing basis as part of their wider risk-management practices.

What are we talking about

ICAAP
Regulatory updates, Basel 3.1
Regulatory Highlights – First Half of July 2025
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In early July, the PRA issued several policy statements and consultation papers with implications for banks of all sizes. We've summarised the key developments and outlined their practical impact across firm types.

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PS7/25 - Basel 3.1 - Pillar 2A SME and Infrastructure Lending Adjustments
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As part of PS7/25, the PRA has published further details on its approach for calculating SME and infrastructure lending adjustments.

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With the Bank of England’s 2025 Bank Capital Stress Test now in motion, small and medium-sized banks should take note. While only the large banks participate directly, it is nonetheless of interest for other firms as they approach their next stress testing exercise. The latest publications bring stress parameters up to date from the 2024 Desk-based Stress Test, and some elements have changed. This article explores what banks can take away from the latest stress programme and how to reflect those developments in their own risk management processes.

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Mark Your Calendar: Key Dates for Basel 3.1 and SDDT
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Mark Your Calendar: Key Dates for Basel 3.1 and SDDT. It has been approximately three months since the PRA released the second part of its near-final rules for implementing the Basel 3.1 standards in the UK. With the official implementation date of 1 January 2026 less than a year away, the clock is ticking for firms to ensure compliance. While the implementation date of 1 January 2026 is top of mind for many, it is essential not to overlook several key milestones in 2025. These will be particularly relevant both for firms seeking SDDT status and banks navigating Basel 3.1 requirements.

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Basel 3.1 Data Collection Exercise
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As part of the Near-final Rules (PS9/24), the PRA has announced an off-cycle review of Pillar 2 capital requirements. This review aims to address double counting, rebase Pillar 2A, and mitigate unintended impacts arising from changes in Pillar 1 RWAs. To facilitate this process, the PRA has requested a specific set of information based on the reference date of 31 December 2024, with a submission deadline of 31 March 2025.

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UK Basel 3.1: An overview of the near-final rules
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On 12 September 2024, the Prudential Regulation Authority (PRA) published the second part of its near-final rules on the implementation of Basel 3.1 standards through Policy Statement 9/24 (PS9/24). The first part of these near-final rules was issued on 2 December 2023, as part of PS17/23.

This article provides an overview of the near-final rules published by the PRA, as part of the UK's implementation of Basel 3.1 (PS9/24).

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CP14/24 – Large Exposures Framework - Key changes
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The PRA published a Consultation Paper on 18 October 2024, outlining proposals to implement the remaining Basel large exposures standards (LEX standards). A key change for small and medium-sized banks is the proposed removal of CRM eligibility for immovable property, meaning exposures secured by immovable properties would no longer qualify for CRM under Large Exposures.

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Simplified Capital Regime for Small Domestic Deposit Takers (SDDTs)
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On 12 September 2024, the PRA published Consultation Paper 7/24 (The Strong and Simple Framework: The simplified capital regime for Small Domestic Deposit Takers (SDDTs)) as part of its Phase 2 of announcements, which sets out the proposed simplified capital regime for SDDTs.

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UK Basel 3.1: Credit risk standardised approach – exposures to corporates
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This article outlines the changes relating to credit risk corporate exposure classification and risk weights under the standardised approach, as part of UK’s implementation of Basel 3.1 (PS9/24).

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UK Basel 3.1: Credit risk standardised approach – retail exposures
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This article outlines the changes relating to credit risk retail exposure classification and risk weights under the standardised approach, as part of UK’s implementation of Basel 3.1 (PS9/24).

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Regulatory updates, Basel 3.1

You might be interested in k-alm®

k-alm® is a risk management software-as-a-service solution that we’ve specifically designed to help small and medium-sized banks conduct stress tests, and evaluate Interest Rate Risk in the Banking Book (IRRBB), without the cost or complexity that is often associated with enterprise solutions.