What are P2R and P2G in the SREP — and how do they differ?

Both flow from the **SREP**, the supervisory review and evaluation process. The **Pillar 2 Requirement (P2R)** is a **binding**, bank-specific own-funds add-on for risks not, or not sufficiently, covered by Pillar 1 — legal basis **Art. 104a of the Capital Requirements Directive (CRD, Directive 2013/36/EU)**. It must be met; breaching it is a hard supervisory event ^[1].

The **Pillar 2 Guidance (P2G)**, by contrast, is a **non-binding** supervisory expectation of an **additional capital buffer above** the binding requirements — legal basis **Art. 104b CRD**. Both articles were inserted by **CRD V (Directive (EU) 2019/878)**; CRD VI (Directive (EU) 2024/1619) does not change this architecture ^[1].

The order in the capital stack is (bottom to top): **Pillar 1 → P2R → combined buffer requirement → P2G**. Because **P2R sits below** the combined buffer requirement, a capital drawdown first exhausts **P2G**, then breaches the **combined buffer requirement** — and it is precisely that breach which triggers the automatic **distribution restrictions (Maximum Distributable Amount, MDA, Art. 141 CRD)** ^[1][2].

The practical consequence: falling below **P2G** is **not** automatically sanctioned — it invites supervisory dialogue and tailored measures. Eating into the **combined buffer**, by contrast, arms the MDA mechanics (restricting dividends, AT1 coupons, bonuses). P2R compliance is the precondition for the buffer to count as available at all.

P2R and P2G do not appear from nowhere: they are the outcome of the SREP, which draws substantially on the bank's internal **ICAAP**. Robust, well-documented ICAAP submissions materially improve the SREP outcome — and thus the calibration of P2R and P2G — while weak processes pull the other way. For capital planning, both figures therefore have to be thought of together with the ICAAP and the combined buffer requirement.