Monitoring of key indicators
Competent authorities should regularly monitor key financial and non-financial indicators to observe changes in the financial and operational conditions, and risk profiles of institutions. Where monitoring reveals a material change in the risk profile of an institution, or any anomalies in the indicators, competent authorities should investigate the causes and, where relevant, review the assessment of the relevant SREP element, including the risk score as relevant, to capture the new information. Competent authorities should regularly review and, where necessary, update their monitoring indicators and tools to ensure these remain relevant and effective.
Consistent with the SREP engagement model in section 2.4, competent authorities should monitor key financial and non-financial indicators at least quarterly for all institutions and establish more frequent monitoring to reflect the specific features of an institution or emerging risks and trends, subject to data availability (e.g. market data).
Competent authorities should set up monitoring systems to identify patterns, material changes and anomalies in the behaviour of the indicators (or combinations of indicators), for instance by setting out alerts based on materiality thresholds. Competent authorities should set escalation procedures to deal with anomalies. Identification of material changes or anomalies in indicators, especially in cases where changes are outliers to the peer-group performance, should be considered by competent authorities as a prompt for further investigation.
Competent authorities should tailor the monitoring systems, and the escalation procedures in case of anomalies, to reflect the institution’s size, complexity, business model and risk profile, focussing on the geographies, sectors and markets where the institution operates.
The monitoring systems should as a minimum be based on information and data reported to the competent authorities and may include the EBA dashboards or indicators. Monitoring systems should include at least the following institution-specific indicators:
indicators related to the institution’s business model analysis (see Title 4), internal governance and controls (see Title 5), risks to capital (see Title 6) and risks to liquidity and funding (see Title 8); indicators for risk of excessive leverage (see Title 7) and indicators deduced from the application of Regulation (EU) 2022/2554;
all the ratios derived from the application of Regulation (EU) 575/2013 and from the national law implementing Directive 2013/36/EU for calculating the minimum prudential requirements (e.g. Core Tier 1 - CET1, liquidity coverage ratio - LCR, net stable funding ratio
NSFR, Leverage ratio);
the minimum requirements for own funds and eligible liabilities (MREL) as specified by Directive 2014/59/EU;
relevant market-based indicators (e.g. equity price, credit default swap - CDS spreads, bond spreads);
where available, indicators based on quantitative or qualitative information from reporting provided to competent authorities that may point to ML/TF risk.
Competent authorities should accompany institution-specific indicators with relevant macroeconomic indicators, where available, in the geographies, sectors and markets where the institution operates. They should also consider relevant independent market research and analysis, including threat landscape reports, where these are available, as an informative source of alternative points of view.