CP10 (Full Document) - European Banking Authority

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
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