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