27. For the calibration of the indicator framework the institution should take into account the …

For the calibration of the indicator framework the institution should take into account the following:

• a. The overall recovery capacity of available options: institutions with a more limited overall recovery capacity should consider an earlier breach of recovery plan indicators to maximise chances of successful implementation of their more limited recovery options.
• b. The timeframe and complexity of the implementation of recovery options, considering governance arrangements, regulatory approvals required in all relevant jurisdictions and potential operational impediments to execution. Institutions which rely on options that are more complex to execute and are likely to take more time to implement should have indicators calibrated accordingly in a more conservative way, to allow sufficient advance warning.
• c. At which stage of the crisis the recovery option can realistically be used effectively. In considering this aspect, the institution should take account of the fact that for some types of options the full benefits could be difficult to reach later in the stress situation as opposed to early implementation. For example, in the case of the recovery option of ‘ raising capital in the market ’ an institution should consider if and when this can realistically be achieved. Institutions should acknowledge that it might become more difficult to raise external capital the closer the institution comes to breaching its capital requirements.
• d. The pace of deterioration in a crisis. Institutions should acknowledge that, while the pace of deterioration will ultimately depend on the specific circumstances of the crisis, specific institutions’ profiles, including but not limite d to institutions with a less diversified business model as well as other individual circumstances, may result in swifter deterioration of the institution’s financial position and in a shorter timeframe being available for the implementation of recovery options. In this respect, institutions should also consider using indicators showing deterioration over time to detect situations in which a rapid and substantial deterioration of an institution`s financial position (e.g. capital) occurs. Moreover, monitoring the change in a metric should be considered where it is difficult to define a single point in time where escalation is needed.
• e. The institution’s risk management framework (including the ICAAP) and risk appetite framework. An institution should ensure that the calibration of recovery plan indicators is consistent with its risk management and risk appetite framework (e.g. early warning framework, contingency and business continuity plans).

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