274. As part of their ongoing monitoring of credit risk, institutions should consider the following …

As part of their ongoing monitoring of credit risk, institutions should consider the following credit quality deterioration signals:

• a. negative macroeconomic events (including but not limited to economic development, changes in legislation and technological threats to an industry) affecting the future profitability of an industry, a geographical segment, a group of borrowers or an individual corporate borrower, as well as the increased risk of unemployment for groups of individuals;
• b. known adverse changes in the financial position of borrowers, such as a significant increase in debt levels or significant increases in debt service ratios;
• c. a significant drop in turnover or, in general, in recurring cash flow (including the loss of a major contract/client/tenant);
• d. significant narrowing of operating margins or income;
• e. a significant deviation in actual earnings from the forecast or a significant delay in the business plan of a project or an investment;
• f. changes in the credit risk of a transaction that would cause the terms and conditions to be significantly different if the transaction were newly originated or issued at the reporting date (such as increased amounts of required collateral or guarantees, or a higher recurring income coverage of the borrower);
• g. an actual or expected significant decrease in the main transaction’s external credit rating, or in other external market indicators of credit risk for a particular transaction or similar transaction with the same expected life;
• h. changes in the conditions of access to markets, a worsening in financing conditions or known reductions in financial support provided by third parties to the borrower;
• i. a slowdown in the business or adverse tendencies in the operations of the borrower that may cause a significant change in the borrower’s ability to meet its debt obligations;
• j. a significant increase in economic or market volatility that may have a negative impact on the borrower;
• k. for transactions secured with collateral, a significant worsening of the ratio of their amount to the value of the collateral due to unfavourable developments in the value of the collateral, or no change or an increase in the outstanding amount due to the payment terms established (such as extended principal payment grace periods, rising or flexible instalments, extended terms);
• l. a significant increase in credit risk on other transactions of the same borrower or significant changes in the expected payment behaviour of the borrower, when known;
• m. a significant increase in credit risk due to an increase in the difficulties of the group to which the borrower belongs, such as residents of a specific geographical area, or significant unfavourable developments in the performance of the borrower’s sector of economic activity or increased difficulties in the group of related borrowers to which the borrower belongs;
• n. known legal action that may significantly affect the borrower’s financial position;
• o. the late delivery of a certificate of adherence, a waiver request or a breach with respect to the covenants, at least regarding the financial covenants, if applicable;
• p. negative institution-internal credit grade/risk class migrations in the aggregate credit portfolio or in specific portfolios/segments;
• q. an actual or expected internal credit rating/risk classification downgrade for the transaction or borrower or a decrease in behavioural scoring used to assess credit risk internally;
• r. concerns raised in the reports by the external auditors of the institution or borrower;
• s. one or more borrower-related facilities 30 days past due.

8.5.1 Follow-up and escalation process on triggered EWIs

1. Forbhreathnú

1.1 Tagairtí

1.2 Ceanglais aitheanta

1.3 Caighdeáin ghaolmhara

2. Ceanglais aitheanta

3. Caighdeáin ghaolmhara

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