Each depositor insured to at least $250,000 per insured bank

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2000 - Rules and Regulations



Appendix C to Subpart A

ADDITIONAL RISK CONSIDERATIONS FOR LARGE RISK CATEGORY I INSTITUTIONS

Information source Examples of associated risk indicators or information
Financial Performance and Condition Information Capital Measures (Level and Trend)
  • Regulatory capital ratios.
  • 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.
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

[Codified to 12 C.F.R. Part 327, Appendix C]

[Appendix C added at 71 Fed. Reg. 69316, November 30, 2006, effective January 1, 2007; amended at 74 Fed. Reg. 9560, March 4, 2009, effective April 1, 2009]


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Last updated May 24, 2010 regs@fdic.gov