(RTS) specifying the assessment methodology Member State national competent authorities (NCAs) shall follow in assessing an institution’s compliance with the requirements for the use of the Internal Ratings Based Approach (IRB Approach).
The final draft RTSs set out standards for NCAs in assessing an institution’s compliance with minimum IRB requirements as defined in Part Three, Title II, Chapter 3 of the Capital Requirements Regulation, when an institution:
- initially applies to use the IRB Approach;
- applies to use the IRB Approach for certain types of exposures in accordance with the sequential implementation plan;
- applies for implementation of material changes to the IRB Approach; or
- applies to return to the use of less sophisticated approaches.
The final draft RTS also seek to provide further clarification on, among other aspects, the independence of the validation function from the credit risk control unit. The level of independence required is based on the proportionality principle: therefore, for global or other systemically important institutions, the separation requirements are stricter.
The final draft RTS will ultimately replace the 2006 Committee of European Banking Supervisors’ guidelines on the implementation, validation and assessment of Advanced Measurement and Internal Ratings Based Approaches, limited to section 2.2.2, section 3 and annex III in the context of the assessment methodology used by NCAs in assessing the compliance of an institution with the requirements to use the IRB Approach.
The final draft RTS will be submitted to the European Commission for endorsement before being published in the Official Journal of the EU (OJ). The technical standards will apply 20 days after their publication in the OJ.
View EBA publishes final draft technical standards on assessment methodology, 21 July 2016