Off-site analysis

The core function of off-site analysis is to monitor the risk situation of supervised banks. To this end, the OeNB’s off-site analysis divisions have set up a system for monitoring banking health based on all available data.

The key data sources used are banks’ regulatory reporting data, any bank data to be reported under other reporting requirements or in OeNB surveys, regular meetings with banks’ representatives, on-site inspection reports, regulatory stress test results, recovery plans, annual reports as well as internal and external auditors’ findings. At the OeNB, off-site analysis is guided by the principle of proportionality, with Article 4 item 145 of the Capital Requirements Regulation (CRR) defining a “small, non-complex institution.”  Within the Single Supervisory Mechanism (SSM) and in line with the SSM Framework Regulation, less significant institutions are broken down according to their risk profile and their potential impact on the domestic financial system. According to the EBA Guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP) and supervisory stress testing, “competent authorities should apply the principle of proportionality in the scope, frequency and intensity of supervisory engagement and dialogue with an institution, and supervisory expectations of the standards the institution should meet, in accordance with the category of the institution.”  Heeding international regulations, the OeNB therefore adjusts the intensity of its off-site analysis to a given bank’s size and risk profile. In their work, analysts are supported by automated systems that draw on reporting data, e.g. for the purposes of calculating standardized ratios for banks.

In 2016, OeNB staff experts performed some 900 analyses of significant and less significant banks.

What kind of analyses does the OeNB perform?

All data that have been collected about individual banks are reviewed at least at annual intervals in the so-called supervisory review and evaluation process (SREP), which serves to produce an assessment of banks’ capital and liquidity adequacy. It is on the basis of the SREP findings that individual capital ratios (SREP ratios) or liquidity adequacy ratios are set – which is the key supervisory measure taken for all banks every year.

Beyond issuing decisions specifying capital ratio requirements, the competent supervisory authorities may impose other supervisory requirements on individual banks. The remit of off-site analysis also includes the responsibility for performing in-depth and ad hoc analyses (e.g. on legal changes such as demergers or mergers), analyzing recovery plans, performing internal model reviews and checking model validation. In the case of significant banks, the follow-up to on-site analysis is also done by the joint supervisory teams, and thus with major involvement of the OeNB’s off-site analysis divisions. In addition to analyzing the operations of individual banks, staff experts also analyze the risk situation of individual sectors of the banking industry and perform thematic reviews of selected banks.

The OeNB’s off-site analysis divisions liaise closely with the supervised banks and frequently meet with representatives of those banks to discuss the large amount of documents and data processed. Based on the respective findings, banks will be called upon by the designated authorities to remedy any identified deficiencies or remove structural weaknesses.

In the supervision of banks with cross-border activities, the OeNB and the Financial Market Authority (FMA) participate in the institutionalized exchange of information with the supervisory authorities of the relevant countries, which takes place on the basis of bilateral and multilateral cooperation agreements within the framework of supervisory colleges. In the case of significant banks, the European Central Bank (ECB) is also involved in this process. The results of discussions in these supervisory colleges serve as the basis for joint supervisory decisions.

How does the off-site analysis of significant banks work?

In the case of banks and banking groups operating in Austria which have been classified as significant institutions or which are subsidiaries of significant institutions, the joint supervisory teams set up within the SSM are in charge of performing the off-site analysis. In performing their reviews, these teams generally apply common SSM methodologies and use common SSM formats.

Off-site analysis of signigicant institutions

How does the off-site analysis of less significant banks work?

As less significant banks are subject only to indirect oversight by the ECB, the responsibility for supervising individual banks has remained with the national supervisory authorities. Since the number of stand-alone banks is rather high in Austria, the OeNB business area tasked with analyzing less significant banks is responsible for supervising about 17% of all less significant institutions within the SSM. Following the above-mentioned international legislation and regulations, the OeNB’s analysts apply the principle of proportionality in line with a given bank’s size and risk profile.  Their work is facilitated by automated systems that draw on reporting data.

To ensure efficient communication and supervision processes and direct lines of responsibility, the OeNB and the FMA implemented a system of single points of contact (SPOC) for each supervised bank and sector as early as in 2008.