CP10 (Full Document) - European Banking Authority

2. Asking institutions to notify supervisors on a timely basis when
they are ready to use a rating system for the calculation of the
regulatory capital requirements for an additional exposure class
or business unit as stated in the roll­out plan; as with (a),
although an ex­ante assessment by supervisors will not be a
formal requirement, supervisors may nevertheless choose to
undertake an assessment of the rating system in the period
before the institution starts to use it for regulatory capital
purposes; or
3. Asking institutions to notify supervisors on a timely basis of their
intention to roll out to an exposure class. Supervisors may
additionally require institutions to receive explicit permission
before starting to use the rating system for this exposure class.
In this case an ex­ante assessment by supervisors may be
required prior to permission being granted
108. Changes in the roll­out plan could be allowed when significant
business environment changes take place. Two situations that could
justify altering an institution’s partial use or roll­out policy are
changes in strategy and mergers and acquisitions.
109. A change in strategy could result from changes in shareholders or
management changes, or from a new business orientation. In either
case, the time horizon for roll­out should remain the same unless
there is good reason for delay, but the roll­out sequence can change.
110. A merger or an acquisition is considered as an important event that
is likely to call for modifying the institution’s partial use and roll­out
policies. Two merger or acquisition situations can be distinguished:
first, where an IRB institution acquires a non­IRB institution, and
second, where a non­IRB institution acquires an IRB institution. In
the first case, the IRB institution may be asked to submit a new
Article 129 application with a new partial use and roll­out policy, or it
may be asked to submit a plan for bringing the entire institution into
compliance with the CRD. The second case is more difficult, since the
acquiring institution does not have IRB permission, and some
requirements, such as senior management understanding, may not
be met. The acquiring institution would normally be asked to make a
new Article 129 application.
111. The rules and criteria for roll­out plans apply to any step towards the
IRB Approach. In practice, this means that an institution planning to
roll out the IRB approach in two steps for any of the exposure
classes mentioned in Article 87(9) (central governments and central
banks, institutions, and corporates) – i.e., moving first from the
Standardised Approach to supervisory estimates of LGDs and CFs,
and subsequently from supervisory estimates of these parameters to
own estimates – can use the whole roll­out package for each step.
Such an institution would, for example, have a double time­frame for
moving to the IRB approach that includes the use of own estimates
of LGDs and Conversion factors. However, it is expected that the
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