CP10 (Full Document) - European Banking Authority

IRB approach can be given only if the competent authority is
satisfied that the institution's systems for managing and rating credit
risk exposures are sound, are implemented with integrity, and meet
the requirements listed in Article 84 and Annex VII, Part 4 of the
CRD. Approval to use the AMA approach can be given only if the
competent authority is satisfied that the institution’s systems for
measuring operational risk meet the qualifying criteria in Annex X,
Part 3 of the CRD.
13. One of the greatest challenges for supervisors in implementing the
CRD is defining the conditions under which they will be satisfied with
these systems. Ideally, the conditions should be convergent across
EU member states, in order to make the playing field as level as
possible for institutions using the AMA and IRB approaches.
14. CEBS has chosen to publish these guidelines for consultation while
the European institutions are still debating the CRD’s final form and
details. Since some of the CRD’s provisions might be substantially
revised before the Directive comes into force, this strategy carries
the risk that some of the guidance presented in this paper will
become obsolete. However, the technical details of the CRD are
unlikely to change. Moreover, given the short remaining timeframe
for national implementation, any further delay in consultation may
make it impossible for CEBS to influence national implementation,
which is one of CEBS’s key tasks. CEBS’s goal is to reduce
inconsistency in implementation and supervisory practices that are
within the competence of the supervisory authorities, while
respecting the need for flexibility and supervisory judgement and
respecting national diversity. By promoting a consistent approach to
supervision across the EU, and by promulgating best practices in
banking supervision and risk management, CEBS will contribute to
enhancing the effectiveness and efficiency of bank supervision,
ensuring a level playing field, and promoting the competitive
standing of the EU banking sector. The new capital regime offers an
unprecedented opportunity to make progress in these areas, because
it implies a new approach to supervision for all EU supervisory
authorities.
1.2. What is covered and what is not?
15. Since the guidelines are supposed to support the national
supervisors’ work when dealing with a model application they cover a
considerable range of topics, sometimes with a considerable degree
of detail, concerning the application, decision and especially the
assessment process.
16. The guidelines relate primarily to the AMA and IRB Approaches. They
do not provide any guidance on the Standardised Approach for Credit
Risk. They do, however, provide some guidance on the Basic
Indicator Approach and The Standardised Approaches for operational
risk.
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