Response to consultation on draft guidelines on recovery plans indicators
Go back
Generally, we welcome the EBA’s approach, which sets minimum high level requirements and largely avoids a prescriptive approach. We however encourage also applying the proposed gradual approach to the definition of categories and their relevance and positioning in the escalation process. We see this as advantageous to the recovery process, as e.g. market and macroeconomic indicators have a significantly higher value to early warning indicators as they do in identifying the triggering of the recovery mechanism. A category of operational risk indicators (e.g. internal or external loss events) could further add to a comprehensive assessment and therefore could be included.
We would however flag that some of the indicators are repetitive or consider less sensitive metrics such as the CET1 ratio versus the total capital ratio.
Lastly, it may be worth clarifying in Annex I of the draft Guidelines whether all specific indicators listed under section C of the table are subject to rebuttable presumption or just those listed under section 5 and 6.
Question 2: Do you consider that there are other categories of indicators apart from those reflected in the draft Guidelines which should be included in the minimum list of recovery plan indicators?
From DB’s perspective, the categories of indicators in this article are comprehensive and sufficient. We would, however, suggest including an additional category covering operational indicators.Generally, we welcome the EBA’s approach, which sets minimum high level requirements and largely avoids a prescriptive approach. We however encourage also applying the proposed gradual approach to the definition of categories and their relevance and positioning in the escalation process. We see this as advantageous to the recovery process, as e.g. market and macroeconomic indicators have a significantly higher value to early warning indicators as they do in identifying the triggering of the recovery mechanism. A category of operational risk indicators (e.g. internal or external loss events) could further add to a comprehensive assessment and therefore could be included.
We would however flag that some of the indicators are repetitive or consider less sensitive metrics such as the CET1 ratio versus the total capital ratio.
Question 3: Do you agree with the list of specific recovery plan indicators included in Annex I, Section C, or would you propose to add other indicators to this Section?
Although we agree with the overall indicator categories listed in Section A and B of Annex I, our view is that the specific recovery plan indicators should be derived from the institution’s individual escalation process in the context of its recovery plan. We feel a set of different indicators to the ones described in Section C, Annex I, could still serve as relevant to the defined categories in Sections A and B. These indicators should be embedded in the bank’s risk and recovery frameworks. Recovery triggers, risk drivers, early warning indicators as well as macro indicators and peer indicators could be stages of escalation and timely monitoring to be included in a bank’s recovery plan. These categories could include both quantitative and qualitative indicators, as they are embedded in DB’s overall risk management and risk appetite framework and in some cases are also used for regulatory monitoring (for instance on capital and liquidity adequacy). Given that the overall recovery plan escalation process and the framework of quantitative and qualitative indicators have various dimensions and are tailored to institution-specific vulnerabilities and risks, we do not see beneficial value in prescribing specific indicators per category, as outlined in Annex I, Section C. This is especially our perspective on the specific list of indicators as defined under categories 5 (Market based indicators) and 6 (Macroeconomic indicators), as for these category a wide set of indicators is available and banks shall have the discretion to include their own indicators to monitor these categories.Lastly, it may be worth clarifying in Annex I of the draft Guidelines whether all specific indicators listed under section C of the table are subject to rebuttable presumption or just those listed under section 5 and 6.