Article 6
Risk pillars and indicators
1.
The resolution authority shall assess the risk profile of institutions on the basis of the following four risk pillars:
(a)
Risk exposure;
(b)
Stability and variety of sources of funding;
(c)
Importance of an institution to the stability of the financial system or economy;
(d)
Additional risk indicators to be determined by the resolution authority.
2.
The ‘Risk exposure’ pillar shall consist of the following risk indicators:
(a)
Own funds and eligible liabilities held by the institution in excess of MREL;
(b)
(d)
Total Risk Exposure divided by Total Assets.
3.
The ‘Stability and variety of sources of funding’ pillar shall consist of the following risk indicators:
(b)
LCR.
4.
The ‘Importance of an institution to the stability of the financial system or economy’ pillar shall consist of the indicator ‘Share of interbank loans and deposits in the European Union, capturing the importance of the institution to the economy of the Member State of establishment’.
5.
The ‘Additional risk indicators to be determined by the resolution authority’ pillar shall consist of the following indicators:
(a)
Trading activities, off-balance sheet exposures, derivatives, complexity and resolvability;
(b)
Membership in an Institutional Protection Scheme;
(c)
Extent of previous extraordinary public financial support.
When determining the various risk indicators in the ‘Additional risk indicators to be determined by the resolution authority’ pillar, the resolution authority shall take into account the importance of those indicators in the light of the probability that the institution concerned would enter resolution and of the consequent probability of making use of the resolution financing arrangement where the institution would be resolved.
6.
When determining the indicators ‘Trading activities, off-balance sheet exposures, derivatives, complexity and resolvability’ referred to in paragraph 5(a), the resolution authority shall take into account the following elements:
(a)
The increase in the risk profile of the institution due to:
(i)
the importance of trading activities relative to the balance sheet size, the level of own funds, the riskiness of the exposures, and the overall business model;
(ii)
the importance of the off-balance sheet exposures relative to the balance sheet size, the level of own funds, and the riskiness of the exposures;
(iii)
the importance of the amount of derivatives relative to the balance sheet size, the level of own funds, the riskiness of the exposures, and the overall business model;
(iv)
the extent to which in accordance with Chapter II of Title II of Directive 2014/59/EU the business model and organizational structure of an institution are deemed complex.
(b)
The decrease of the risk profile of the institution due to:
(i)
relative amount of derivatives which are cleared through a central counterparty (CCP);
(ii)
the extent to which in accordance with Chapter II of Title II of Directive 2014/59/EU an institution can be resolved promptly and without legal impediments.
7.
When determining the indicator referred to in paragraph 5(b), the resolution authority shall take into account the following elements:
(a)
whether the amount of funds which are available without delay for both recapitalisation and liquidity funding purposes in order to support the affected institution in case of problems is sufficiently large to allow for a credible and effective support of that institution;
(b)
the degree of legal or contractual certainty that the funds referred to in point (a) will be fully utilized before any extraordinary public support may be requested.
8.
The risk indicator referred to in paragraph 5(c) shall take the maximum value of the range referred to in Step 3 of Annex I for:
(a)
any institution that is part of a group that has been put under restructuring after receiving any State or equivalent funds such as from a resolution financing arrangement, and is still within the restructuring or winding down period, except for the last 2 years of implementation of the restructuring plan;
(b)
any institution that is liquidated, until the end of the liquidation plan (to the extent that it is still liable to pay the contribution).
It shall take the minimum value of the range referred to in Step 3 of Annex I for all other institutions.
9.
For the purposes of paragraphs 6, 7 and 8, the determination of the resolution authority shall be based on the assessments conducted by competent authorities where available.