Monitoring of key indicators
Competent authorities should engage in regular monitoring of key financial and non-financial indicators to monitor changes in the financial conditions and risk profiles of institutions. Competent authorities should also use this monitoring to identify the need for updates to the assessment of SREP elements in light of new material information outside of planned supervisory activities. Where monitoring reveals a material change in the risk profile of the institution, or any anomalies in the indicators, competent authorities should investigate the causes, and, where relevant, review the assessment of the relevant SREP element in light of the new information.
Following the model of minimum engagement discussed in Title 2, competent authorities should monitor key financial and non-financial indicators at least on a quarterly basis for all institutions. However, depending on the specific features of the institutions or situation, competent authorities may establish more frequent monitoring, taking into consideration the availability of the underlying information (e.g. market data).
Competent authorities should establish monitoring systems and patterns allowing for the identification of material changes and anomalies in the behaviour of indicators, and should set thresholds, where relevant. Competent authorities should also establish escalation procedures for all relevant indicators (or combinations of indicators) covered by the monitoring to ensure that anomalies and material changes are investigated.
Competent authorities should tailor the set of indicators and their thresholds to the specific features of individual institutions or groups of institutions with similar characteristics (peer groups). The framework of indicators, monitoring patterns and thresholds should reflect the institution’s size, complexity, business model and risk profile and should cover geographies, sectors and markets where the institution operates.
Competent authorities should identify the indicators to be tracked through regular monitoring primarily from regular supervisory reporting and using definitions from common reporting standards. Where relevant, EBA dashboards or indicators being monitored by the EBA may be used as a source of information against which individual institutions can be monitored.
The framework of indicators established and the outcomes of the monitoring of key indicators should also be used as input for the assessment of risks to capital and risks to liquidity and funding under the respective SREP elements.
Indicators used for monitoring should include at least the following institution-specific indicators:
all the ratios derived from the application of Regulation (EU) No 575/2013 and from the national law implementing Directive 2013/36/EU for calculating the minimum prudential requirements (e.g. Core Tier 1 (CT1), liquidity coverage ratio (LCR), net stable funding ratio (NSFR), etc.);
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, etc.);
where available, recovery indicators used in the institution’s own recovery plans; and
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.
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. Specifically, competent authorities should:
Competent authorities should also consider supplementing the regular monitoring of key financial and non-financial indicators with review of independent market research and analysis, where this is available, which can be a helpful source of alternative points of view.