European Union:
European Central Bank Consults On Guide To Internal Models
13 April 2018
Shearman & Sterling LLP
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On March 28, 2018, the European Central Bank began a
consultation on the first chapter of a proposed guide to internal
models. The Capital Requirements Regulation requires the ECB to
assess and grant permission for banks directly supervised by the
ECB to use internal models for credit risk, counterparty credit
risk and market risk. The ECB's proposed guide aims to set out
how the ECB intends to approach the assessment of whether a firm
meets the necessary requirements for the permission to be
granted.
The consultation covers only the first chapter of the proposed
guide. This chapter is on general topics comprising overarching
principles for internal models, implementation of the internal
ratings-based approach, internal model governance, internal
validation and audit, model use and change management as well as
third-party involvement. The ECB intends to consult on
model-specific chapters, including for credit, market and
counterparty credit risks, at a later date.
The consultation closes on May 25, 2018.
The consultation paper is available at: https://www.bankingsupervision.europa.eu/legalframework/publiccons/pdf/internal_models/ssm.guidegeneraltopics.en.pdf
.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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