240. Competent authorities should challenge credit institutions’: a) Operational plan and …

Competent authorities should challenge credit institutions’:

a) Operational plan and organisational arrangements if any of the following criteria is met:
i. The framework for identifying, measuring, managing, monitoring and mitigating NPEs and FBEs, including for early recognition of NPEs and appropriate workout activities, is deemed inadequate by the competent authorities considering the size and complexity of the NPE problem at the credit institution.
ii. It does not allocate or does not foresee the future allocation of the necessary human and technical resources as well as providing for appropriate coverage by the internal control functions.
iii. It does not adequately describe the operationalisation of the monitoring process for NPEs.
b) NPE strategy, if the combination of strategic options for the different portfolios and segments, including foreclosed assets, where applicable, does not result, in the authority’s view, in the most effective and efficient strategy for NPE reduction.
c) Capital plan, if it does not appropriately set out the planned reduction of NPEs from the balance sheet as per the NPE strategy and does not include suitable actions to ensure that a sufficient amount of capital and capital buffers are available, as well as envisaging timely and adequate impairments and write-offs.
d) Performance appraisal system, if the incentives for the management body and relevant managers and staff lack specific quantitative elements linked to the NPE reduction targets defined in the credit institution’s NPE strategy.

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