100. Competent authorities should consider assessing profitability trends and ratios, having regard …

Competent authorities should consider assessing profitability trends and ratios, having regard to the risks the applicant credit institution envisages assuming and the relative performance compared to peers. To support this assessment, competent authorities may refer to the most common profitability and risk indicators such as return on equity, return on assets, cost to income ratio, cost of risk and leverage ratio. The competent authority’s use of specific indicators should reflect the type and level of risk envisaged by the applicant credit institution to generate profits (for instance an institution generating lower and more stable returns with a conservative risk appetite may be more sustainable than one with high returns but a very aggressive risk appetite). Competent authorities should carefully assess the risk underlying the economic performance (e.g. the level of risk of assets), also taking into account risk-adjusted indicators to the extent possible.

1. Overview

1.1 References

1.2 Identified Requirements

1.3 Related Standards

2. Identified Requirements

3. Related Standards

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