IndicatorsIndicators

Indicators

Inclusion of all the major risk types in the regulated institution’s risk management framework. Relation between the risk appetite of the regulated institution and its capital requirements and expected shareholder returns. Linkages with external credit ratings.
Inclusion of definitions and methodologies for all significant risk types that are applied consistently across business units in the regulated institution’s risk management framework. Usage of a coherent framework for measuring all risk types.
Existence of risk tolerances, risk limits and delegations across the organisation, and the extent to which they are established by reference to the information referred to in paragraphs 1 and 2 of this Attachment.
The extent to which the regulated institution has developed and is using a Board-approved economic capital model as an integral part of its capital management framework and separately from any regulatory need.
A Board-approved process for determining a ‘cost of capital’ and required hurdle rate(s) of return for evaluating business strategies, opportunities and product pricing. The extent to which this information is applied consistently across all the business units.
The extent to which the evaluation of new business initiatives (including acquisition and expansion plans) is based on projected returns and the economic capital required to support these initiatives. The extent to which the economic capital is based on the economic capital model and other considerations.
The extent to which the setting and monitoring of the product pricing is influenced by the economic capital allocated and the required returns relative to that capital.
The extent to which capital allocation for business units and products is based on the underlying risks as reflected in the economic capital model. Demonstration that the assessment of business unit performance is based on return on allocated capital and/or other risk-based measures.

9. The extent to which performance and incentive remuneration of key executives is influenced by risk based measures, including economic capital allocation.