101. Competent authorities should be able to gain a clear understanding of the institution’s …

Competent authorities should be able to gain a clear understanding of the institution’s sources of profit and loss generation (notably of the underlying drivers such as volumes – stock and flow – and prices/margins) in order to identify the key drivers and dependencies of a business performance and potential vulnerabilities. Where appropriate in light of the proportionality approach set out in paragraph 70, competent authorities should perform a breakdown of revenues / source of income in order to understand whether the expected sources of revenues are consistent with the overall targeted business strategy (type of business model, size of the business). In this regard, competent authorities should pay attention to excessively optimistic profit expectations, relating for instance to the forward interest rate and to other relevant revenue generating assumptions, and their potential impact on the reliability and, ultimately, the sustainability of the projections.

1. Overview

1.1 References

1.2 Identified Requirements

1.3 Related Standards

2. Identified Requirements

3. Related Standards

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