Risk categories and core risk indicators
Capital coverage ratio or CET1 ratio
2. Liquidity and funding
3.1 NPL ratio
4. Business model and management
4.1. RWA / Total assets
5. Potential losses for the DGS
5.1. Unencumbered assets / Covered deposits
The sum of the minimum weights specified in these guidelines for risk categories and core risk
indicators amounts to 75% of total weights. DGSs should distribute the remaining 25% among
the risk categories laid down in Table 1.
The DGS should allocate the flexible 25% of weights by distributing them among the additional
that the following conditions are met:
the minimum weights of risk categories and core risk indicators are preserved;
where only core risk indicators are used in the calculation method, the flexible 25%
‘Liquidity and funding’ - 24%; ‘Asset quality’ - 18%; ‘Business model and management’ -
17%; and ‘Potential use of DGS funds’ - 17%;
indicator, should not be higher than 15%, except for additional qualitative risk indicators
representing the outcome of a comprehensive assessment of the member institution’s
risk profile and management (included in the risk category ‘Business model and
management’) and cases specified in paragraph C1 59. O
Where a core indicator is not used, the minimum weight of the remaining core indicator from
the same risk category should amount to the full minimum weight for this risk category.
Where there is only one core indicator in a category, and this core indicator is not used, it
should be replaced by a proxy with the same minimum weight as the core indicator.
All core risk indicators are used and no additional indicators are included in the calculation
method. The flexible 25% of weights is distributed among core risk indicators in such a way that
the proportions between minimum weights for risk categories and core risk indicators are
retained (for example, additional weight for capital amounts to 6% = 25% × (18%/75%).
(1) + (2)
Capital coverage ratio
3.1 NPL ratio
4.1. RWA / Total assets
One of the core risk indicators is not available (NSFR) during a transitional period and no
additional risk indicators are included in the calculation method. The minimum weight assigned to
the LCR ratio would amount to 18% - the total weight for the risk category ‘Liquidity and funding’
(9% + 9%) increased by further 6% up to 24% - the maximum weight for this category as per
paragraph 57. The other weights would be distributed among the risk indicators in a similar way
as under Scenario 1.
+ (6% + 9%)
All core risk indicators are used in the calculation method but the DGS would like to increase (by
5%) the weight of one core indicator (‘Leverage ratio’) because it considers this indicator to be
highly effective in predicting distress among its member institutions. Moreover, the DGS intends
to include two additional risk indicators (one with a weight of 3% in the risk category ‘Asset
quality’, and the second one with a weight of 5% in the risk category ‘Business model and
management’). The remaining 12% of flexible weights will be distributed among all the other core
risk indicators in such a way that preserves the relationship of the minimum weights assigned to
3.2. Additional risk indicator (1)
4.3. Additional risk indicator (2)
All core risk indicators are used in the calculation method but the DGS would also like to include
additional five indicators (one indicator in risk categories ‘Capital’, ‘Asset quality’ and ‘Potential
losses for the DGS’, and two indicators in risk category ‘Business model and management’). The
weights assigned to risk indicators are presented in the last column in the table below.
Additional risk indicator (1)
4.4. Additional risk indicator (4)
The risk indicators used in the calculation method should capture a sufficiently wide spectrum
of sources of risk.
The selection of the risk indicators should be aligned with the best practices in risk
management and with the existing prudential requirements.
For each member institution the values of risk indicators should be calculated on a solo basis.
However, the value of risk indicators should be calculated at a consolidated level where the
central body and all credit institutions permanently affiliated to the central body, as referred
to in Article 10(1) of Regulation (EU) 575/2013, to be subject as a whole to the risk weight
determined for the central body and its affiliated institutions on a consolidated basis.
Where a member institution has received a waiver from meeting capital and/or liquidity
requirements on a solo basis pursuant to Articles 7, 8 or 21 of Regulation (EU) 575/2013, the
corresponding capital/liquidity indicators should be calculated at the consolidated or
To calculate values of risk indicators for a given period the DGS should use:
the value at the end of the period (for example, net income as reported on 31 December
example, average value of total assets from 1 January to 31 December in a given year) for
positions from the balance sheet.
Part IV - Optional elements of the calculation methods
According to Article 13(1) of Directive 2014/49/EU, Member States may decide that credit
institutions should pay a minimum contribution irrespective of the amount of their covered
Where a Member State exercises the option to have member institutions paying a minimum
calculation formula should be used to calculate the individual contributions:
In cases where the minimum contributions are paid by each member institution in
In cases where the minimum contributions are paid only by those member institutions
formula (as specified in paragraph 35) would be lower than the amount of the
Annual contribution for a member institution ‘i’
Contribution rate (applied for all member institutions in a given year)
Covered deposits for a member institution ‘i’
Adjustment coefficient (applied for all institutions in a given year).
When setting a minimum contribution, competent authorities and designated authorities
should take due care of the risk of moral hazard inherent in setting fixed contributions and the
risk of creating barriers to entering the market for banking services.
According to Article 13(1) of Directive 2014/49/EU, Members States may decide that members
of an IPS pay lower contributions to the DGS. As reflected in recital 12 of
Directive 2014/49/EU, this option has been introduced in order to recognise ‘schemes which
protect the credit institution itself and which, in particular, ensure its liquidity and solvency’.
Where a Member State avails itself of this option, the aggregated risk weight (ARW) of an
institution which is also a member of a separate IPS may be reduced to take into account the
additional safeguard provided by the IPS. In this case, the reduction should be implemented by
including an additional risk indicator, related to IPS membership, in the risk category ‘Business
model and management’ of the calculation method. The IPS membership indicator should
reflect the additional solvency and liquidity protection provided by the scheme to the
member, taking into account whether the amount of the IPS ex-ante funds, which are available
without delay for both recapitalisation and liquidity funding purposes in order to support the
affected entity if there are problems, is sufficiently large to allow for credible and effective
support of that entity. Additional funding commitments callable upon request and backed by
liquidity reserves held by IPS members in IPS central institutions may also be taken into
account. The level of the IPS funding should be examined in relation to the total assets of the
IPS member institution.
Where a Member State allows a DGS, including an IPS officially recognised as a DGS, to use the
available financial means for alternative measures in order to prevent the failure of a credit
institution, this DGS may include an additional factor in its own risk-based calculation based on
the risk-weighted assets of the institution. In this case, the formula is as follows:
) × µ
Where A is the amount of risk-weighted assets in institution ‘i’.
Before the implementation of this additional factor by a DGS, competent authorities should
assess, as part of the approval procedure referred to in paragraph 14, whether its introduction
is commensurate with the risk of having to intervene in order to prevent the failure of
institutions beyond the protection of covered deposits.
According to Article 13(1) of Directive 2014/49/EU, Member States may provide for lower
contributions from institutions belonging to low-risk sectors which are regulated under
If a Member State has, through regulation, imposed restrictions on institutions within a certain
subsector in a manner that substantially reduces the likelihood of failure, DGS contributions
from these institutions may be proportionately reduced on the basis of adequate motivation.
Reductions in contributions from institutions belonging to low-risk sectors should be allowed
failure has been consistently lower than in other sectors. Agreement on reduced contributions
should be made by the competent authority in cooperation with the designated authority,
after consulting the DGS.
Such reductions should be implemented in the calculation method by including an additional
Competent authorities and designated authorities should implement these guidelines by
that date on, contributions to be raised by DGSs should comply with these guidelines.
However, where, according to the third subparagraph of Article 20(1) of Directive 2014/49/EU,
Directive 2014/49/EU by 3 July 2015, these guidelines should be implemented by the new date
set by these authorities, and in any case no later than by 31 May 2016.
Annex 1 - Methods to calculate Aggregate Risk Weights (ARW) and
determine risk classes
setting upper and lower boundaries for each bucket. The number of buckets for each risk
indicator should be at least two. The buckets should reflect different levels of risk posed by
the member institutions (for example, high, medium, low risk) assessed on the basis of
indicator is higher (lower) than the upper (lower) boundary of the highest (lowest) bucket, it
should be assigned the IRS of the highest (lowest) bucket.
- when using the relative basis, the IRSs of member institutions depends on their relative
risk position vis-à-vis other institutions; in this case, institutions are distributed evenly
between risk buckets, meaning that institutions with similar risk profiles may end up in
- when using the absolute basis, the buckets’ boundaries are determined to reflect the
riskiness of a specific indicator; in this case, all institutions may end up in the same bucket
if they all have a similar level of riskiness.
For each risk indicator the boundaries of buckets determined on the absolute basis should
calibration of the boundaries should take into account, where available, the regulatory
requirements applicable to the member institutions and historical data on the indicator’s
values. The DGS should avoid calibrating the boundaries in such a way that all member
institutions, despite representing significant differences in the area measured by a particular
risk indicator, would be classified into the same bucket.
For each risk indicator, the IRSs assigned to buckets should range from 0 to 100, where 0