Title 3 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 investment firms. 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 investment firm, 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.

Competent authorities should monitor key financial indicators in alignment with the frequency of reporting for the investment firm. The monitoring of non-financial indicators should be adapted to the nature and volatility of the specific non-financial indicator, but should be conducted at least on a yearly basis.

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 ensure that for all relevant indicators (or combinations of indicators) covered by the monitoring any anomalies and material changes are investigated. Competent authorities should thus determine the cause and assess the materiality of the potential prudential impact on the investment firm and the possible consequences for the firm’s categorisation.

Competent authorities should tailor the set of indicators and their thresholds to the specific features of individual investment firms or groups of investment firms with similar characteristics (peer groups). The framework of indicators, monitoring patterns and thresholds should reflect the investment firm’s size, complexity, business model and risk profile and should cover geographies, sectors and markets where the investment firm 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.

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 firm-specific indicators:

• a. financial and non-financial indicators addressing the risk categories covered by these guidelines applicable to the specific category of investment firm (see Titles 6 and 8);
• b. all the ratios derived from the application of Regulation (EU) No 2019/2033 and from the national law implementing Directive (EU) No 2019/2034;
• c. where applicable, the minimum requirements for own funds and eligible liabilities (MREL) as specified by Directive 2014/59/EU;
• d. where available, recovery indicators used in the firm’s own recovery plans.

Competent authorities should include non-financial indicators such as, for example, the scope of authorisation, the number of employees, the number of complaints or other non-financial relevant indicators, and they may define additional indicators as deemed appropriate.

Competent authorities should accompany firm-specific indicators with relevant macro-economic indicators, where available, in the geographies, sectors and markets where the investment firm operates.

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.