CP10 (Full Document) - European Banking Authority

More documents

Recommendations

Info

approach Subsidiary/business line A locally uses BIA Subsidiary/business line B locally uses TSA (or ASA) Subsidiary/business line C locally uses AMA Partial use acceptable Partial use acceptable Partial use not acceptable Partial use acceptable Partial use acceptable Partial use acceptable Table 2 LEGAL ENTITY basis: Partial use combinations and “Solo capital requirement” Business Line/Branch approach Legal entity level approach Legal entity uses BIA Legal entity uses TSA Legal entity uses AMA (or ASA) Business Line/Branch Partial use not Partial use generally not A uses BIA acceptable acceptable 14 Business Line/Branch Partial use not Partial use acceptable B uses TSA (or ASA) acceptable Business Line/Branch Partial use not Partial use not C uses AMA acceptable acceptable 4.2. The simpler approaches (BIA/TSA/ASA) 4.2.1. Entry criteria and use of TSA and ASA 419. The CRD offers several approaches for calculating regulatory capital requirements for Operational risk: · The Basic Indicator Approach (BIA) (Article 103); · The Standardised Approach (TSA) (Article 104); · The Alternative Standardised Approach (ASA) (Article 104(3) and Annex X, Part 2, Paragraphs 9 and 13); and · The Advanced Measurement Approach (AMA) (Article 105 and Annex X, Part 3). 420. An institution wanting to use the ASA has to meet the qualifying criteria for the TSA (Annex X, Part 3, Paragraph 17) as well as the specific conditions imposed for the ASA (Annex X, Part 3, Paragraphs 15 and 16). 421. An institution wanting to use the TSA has to inform its competent authorities in advance of its intentions in advance. They will make clear how this exante information can be provided (informally or by 14 In order to enhance the use of the high risk management standards of the AMA throughout the legal entity, some countries may accept a partial use in this case, if at least the risk management standards required by the CRD for the Standardised Approach are implemented for the subsidiary’s Business Lines/Branches using the BIA approach. Page 98 of 123
way of a formal notification). The institution has to hold supporting documentation related to the observance of the TSA qualifying criteria. It has to deliver a document certifying, based on a self assessment, that it meets the TSA qualifying criteria. The certification document based on a self assessment may not be required if the competent authorities perform their own assessment to determine whether the institution complies with the criteria set out in the CRD for the use of the TSA. The choice of how this process is organized (onsite versus offsite) is at the convenience of the competent authorities. 422. An institution wanting to use the ASA has to inform its competent authorities of its intentions in advance and also has to receive a prior exante authorization from its competent authorities according to Article 104 (3). It has to inform its competent authorities of its intention. They will make clear how this exante information can be provided (informally or by way of a formal notification). The institution has to hold supporting documentation related to the observance of the TSA qualifying criteria and the ASA conditions. It has to deliver a document certifying, based on a self assessment, that it meets these criteria and conditions. The certification document based on a self assessment may not be required if the competent authorities perform their own assessment. The choice of how this process is organized (onsite versus offsite) is at the convenience of the competent authorities. 4.2.2. General and specific conditions for the use of ASA 423. Annex X, Part 2, Paragraph 15 sets a quantitative condition on the relative size of retail and commercial banking activities for institutions opting for the ASA. In particular, the retail and commercial banking activities shall account for at least 90% of the institution’s income. In addition, Paragraph 16 requires that the institution must be able to demonstrate to the authorities that a significant proportion of its retail and/or commercial banking activities consists of loans associated with a high probability of default. 424. In order to provide institutions some stability in the choice of the ASA, a certain degree of flexibility can be introduced in the practical application of the 90% condition. In particular, a oneyear window can be granted, meaning that even if the threeyear average drops below 90%, an institution using the ASA can be allowed to remain on the ASA if it can convince the relevant authority that the three year average will again reach 90% the following year. 425. Institutions opting for the ASA are required to use robust and welldocumented demonstration methods, relating to both the charging of high interest rate margins and the holding of a risky credit portfolio. 4.2.3. Relevant indicator: threeyear average Page 99 of 123
Page 1 and 2:
CEBS CP 10 11 July 2005 Guidelines
Page 3 and 4:
ANNEXES ...........................
Page 5 and 6:
to use these approaches. 6. The gui
Page 7 and 8:
IRB approach can be given only if t
Page 9 and 10:
approaches for regulatory purposes
Page 11 and 12:
purposes, when the group has submit
Page 13 and 14:
efficient running of the process, u
Page 15 and 16:
and/or 105 of the CRD, subject to t
Page 17 and 18:
58. Institutions intending to move
Page 19 and 20:
translated, supervisors will organi
Page 21 and 22:
76. The issues that supervisors are
Page 23 and 24:
holding company, the competent auth
Page 25 and 26:
· A new approval process shall not
Page 27 and 28:
· Institutions may not be ready to
Page 29 and 30:
2. Asking institutions to notify su
Page 31 and 32:
116. ‘Immaterial’ should refer
Page 33 and 34:
128. The EU Council has proposed th
Page 35 and 36:
should start with inputs, and those
Page 37 and 38:
to be only broadly compliant with t
Page 39 and 40:
institutions to be able to identify
Page 41 and 42:
differentiated if their loss rates
Page 43 and 44:
payments are originating from the s
Page 45 and 46:
any of its subsidiaries in full, wi
Page 47 and 48: 197. As a general rule, the rating
Page 49 and 50: · Their discounting method results
Page 51 and 52: grades. In this case, all of the re
Page 53 and 54: of challenges, including choosing t
Page 55 and 56: 228. In principle, supervisors do n
Page 57 and 58: prices on defaulted exposures, and
Page 59 and 60: LGD estimation, they have to be tak
Page 61 and 62: The exposure value for the followin
Page 63 and 64: investigating the potential drivers
Page 65 and 66: advisable in some circumstances not
Page 67 and 68: terms) the proof of consistency wit
Page 69 and 70: 302. The information used in credit
Page 71 and 72: exposures to obligors or facilities
Page 73 and 74: Pooled data sets for good predictiv
Page 75 and 76: inputs to the IRB approach. Supervi
Page 77 and 78: used to quantify the risk parameter
Page 79 and 80: years for the economy as a whole, a
Page 81 and 82: · Institutions must be able to bri
Page 83 and 84: Benchmarking the outputs of interna
Page 85 and 86: model, and the internal use of the
Page 87 and 88: systems” (Annex VII, Part 4, Para
Page 89 and 90: · Examining reports from Internal
Page 91 and 92: organisational point of view (e.g.,
Page 93 and 94: conclusions are wellfounded. Inte
Page 95 and 96: 401. The role played by the CRC fun
Page 97: subsidiary, or by different subsidi
Page 101 and 102: · The rollout plan should have a
Page 103 and 104: Principles and examples 1. The purp
Page 105 and 106: etween systems, recording of data t
Page 107 and 108: · The definition of an appropriate
Page 109 and 110: incorporate forwardlooking elemen
Page 111 and 112: · Approving proactive risk managem
Page 113 and 114: frequency and format of the interna
Page 115 and 116: · Development of internal processe
Page 117 and 118: · Understanding the extent and nat
Page 119 and 120: ‣ If not, inform the other superv
Page 121 and 122: the decision. ‣ Agree on the proc
show all

CP10 (Full Document) - European Banking Authority

Create successful ePaper yourself

Delete template?

Save as template?