4.2 Preliminary assessment

Competent authorities should analyse the investment firm’s main activities, geographies and market positions to identify, at the highest level of consolidation in the jurisdiction, the investment firm’s:

• a. major geographies;
• b. major subsidiaries/branches; and
• c. main activities and, where relevant, business lines or product lines.

For this purpose, competent authorities should consider a range of relevant metrics at the point of assessment and their changes over time. These metrics should include:

• a. contribution to overall revenues/costs;
• b. share of assets;
• c. contribution to own funds requirements; and
• d. market position.

Competent authorities should use this preliminary assessment to:

• a. determine the materiality of business activities: competent authorities should determine which geographies, subsidiaries/branches, activities, and where relevant business lines or product lines are the most material based on profit contribution (notably based on P&L), risk (including K-factors or other measures of risk) and/or organisational priorities. Competent authorities should use this information as a basis for identifying what the BMA should focus on (as covered further in Section 4.3;
• b. identify the peer group: competent authorities may determine (i) the relevant peer group for the investment firm on the basis of its structure and activities; (ii) to conduct a BMA, the peer group on the basis of the rival product/business lines targeting the same source of profits/customers;
• c. support the application of the principle of proportionality: competent authorities may use the outcomes of the preliminary assessment to help determine the appropriate granularity of assessment.