We generally support the possibility of using both quantitative and qualitative indicators for recovery, because all together they can present the economic situation of institution in more detailed way. However we maintain our former remark, that only the limited number of indicators should be treated as mandatory ones. The needs to determine the qualitative indicators should depend on the profile of each institutions. We have also have in mind that it can be difficult to define the appropriate level of qualitative indicators which should stimulate any recovery action.
We recommend also to coordinate the indicators with the reporting requirements that already exists. Such solution will give easier permanent access to the most important information.
As stated above, we would like to minimize the list of indicators to be restricted to capital and liquidity indicators. Nevertheless, each institution, but also competent authorities should have the flexibility to use other indicators which should be more appropriate for institution and may be monitored regularly by this institution and can be used in effective way in process of decision-making for recovery purpose.
In relation to the minimum and the additional list of recovery plan indicators, we consider that the minimum list is sufficiently extensive. Therefore, some of the additional indicators may be considered unnecessary for banks that do not have certain types of business lines or exposures. In our opinion some indicators are also strongly correlated or repetitive.
As we have noted in our response to Question 2, we agree with Section A as minimum recovery indicators, particularly point 1 and 2 and we also generally support using the categories of recovery indicators from these areas defined in Section C. Other indicators should be treated as the illustrative list, not as the strict indicators for any recovery action.
The majority of specific indicators described in Section C are the metrics that are usually used for measuring the effectiveness of financial institution. We do not see any problems to demand the institution to monitor them.
No, generally the threshold must be defined by each institution depending on their risk appetite and risk management framework. The banks themselves are best-qualified to establish the indicators, as they have the best knowledge of the nature, value of the business model, activities and strategic choices. Therefore banks in collaboration with their competent authorities should establish the appropriate thresholds for each quantitative indicator which is relevant to its business model and risk appetite. The common threshold can be used only in area where there are clear prudential requirements.
In practice we are convinced that only the sum of individual indicators will allow to assess the situation of institution correctly. The level of majority of individual indicators should not be the sufficient trigger for any recovery action in institution.