| Information
source |
Examples of Associated Risk Indicators or
Information |
|---|
| Financial Performance
|
Capital Measures (Level and
Trend) |
| and Condition Informa- |
• Regulatory capital
ratios |
| tion |
• Capital
composition |
|
• Dividend payout
ratios |
|
• Internal capital growth rates relative to
asset growth |
|
Profitability Measures (Level and
Trend) |
|
• Return on assets and return on risk-adjusted
assets |
|
• Net interest margins, funding costs and
volumes, earning asset yields and volumes |
|
• Noninterest
revenue sources |
|
• Operating
expenses |
|
• Loan loss provisions relative to problem
loans |
|
• Historical volatility of various earnings
sources |
|
Asset Quality Measures (Level and
Trend) |
|
• Loan and securities portfolio composition and
volume of higher risk lending activities (e.g., sub-prime
lending) |
|
• Loan performance measures (past due,
nonaccrual, classified and criticized, and renegotiated loans) and
portfolio characteristics such as internal loan rating and credit score
distributions, internal estimates of default, internal estimates of
loss given default, and internal estimates of exposures in the event of
default |
|
• Loan loss reserve
trends |
|
• Loan growth and underwriting
trends |
|
• Off-balance sheet credit exposure measures
(unfunded loan commitments, securitization activities, counterparty
derivatives exposures) and hedging activities |
|
Liquidity
and Funding Measures (Level and Trend) |
|
• Composition of
deposit and non-deposit funding sources |
|
• Liquid
resources relative to short-term obligations, undisbursed credit lines,
and contingent liabilities |
|
Interest Rate Risk and Market
Risk (Level and Trend) |
|
• Maturity and repricing
information on assets and liabilities, interest rate risk
analyses |
|
• Trading book composition and Value-at-Risk
information |
| Market Information |
• Subordinated debt
spreads |
|
• Credit default swap
spreads |
|
• Parent's debt issuer ratings and equity
price volatility |
|
• Market-based measures of default
probabilities |
|
• Rating agency watch
lists |
|
• Market analyst reports |
| Stress
Considerations |
Ability to Withstand Stress
Conditions |
|
• Internal analyses of portfolio composition
and risk concentrations, and vulnerabilities to changing economic and
financial conditions |
|
• Stress scenario development and
analyses |
|
• Results of stress tests or scenario analyses
that show the degree of vulnerability to adverse economic, industry,
market, and liquidity events. Examples include: |
|
i. an
evaluation of credit portfolio performance under varying stress
scenarios |
|
ii. an evaluation of non-credit business
performance under varying stress scenarios |
|
iii. an
analysis of the ability of earnings and capital to absorb losses
stemming from unanticipated adverse
events |
|
• Contingency or emergency funding strategies
and analyses |
|
• Capital adequacy assessments
|
| Information
source |
Examples of Associated Risk Indicators or
Information |
|---|
|
Loss Severity
Indicators |
|
• Nature of and breadth of an institution's
primary business lines and the degree of variability in valuations for
firms with similar business lines or similar
portfolios |
|
• Ability to identify and describe discrete
business units within the banking legal
entity |
|
• Funding structure considerations relating to
the order of claims in the event of liquidation (including the extent
of subordinated claims and priority claims) |
|
• Extent of
insured institutions assets held in foreign
units |
|
• Degree of reliance on affiliates and
outsourcing for material mission-critical services, such as management
information systems or loan servicing, and
products |
|
• Availability of sufficient information, such
as information on insured deposits and qualified financial contracts,
to resolve an institution in an orderly and cost-efficient
manner
|
