64. Competent authorities should perform an analysis of quantitative features of the institution’s …

Competent authorities should perform an analysis of quantitative features of the institution’s current business model to assess its ability to generate acceptable profits in the short, medium and long term, given the institution’s risk appetite and its funding and capital structures. Areas for analysis by competent authorities should include:

• a. drivers of profitability, including trends, by assessing the underlying elements of the institution’s earning capacity, after exception items and one-offs, breakdown of income streams, breakdown of costs and costs allocation, impairment provisions and key ratios (e.g. net interest margin, cost/income, loan impairment, and cost of risk). This assessment may be complemented by the analysis of the relevant risk-adjusted profitability metrics (e.g. Return On Allocated Capital – ROAC, or the Risk-Adjusted Return on Capital Return - RAROC), where these are available and deemed reliable;
• b. the balance sheet, including trends, by assessing the asset and liability mix, funding structure, change in the TREA and own funds, and key ratios (e.g. return on equity/assets, Core Tier 1, funding gap), as well as concentrations in the P&L and balance sheet related to customers, sectors and geographies;
• c. risk appetite and tolerance levels, by assessing the formal limits put in place by the institution by risk type and its adherence to them to understand the risks that the institution is willing to take to drive its financial performance and to ensure operational resilience. This should also cover the impact tolerance for ICT disruptions.

1. Visão geral

1.1 Referências

1.2 Requisitos identificados

1.3 Normas relacionadas

2. Requisitos identificados

3. Normas relacionadas

• EBA - Published by the European Banking Authority at https://www.eba.europa.eu/