Principles for the classification of changes to, and extensions of, the use of alternative internal models, and of changes to the subset of the modellable risk factors
1. When calculating the quantitative impacts in accordance with Article 2(1) and (2), Article 3(1) and (2), Article 5(1) and Article 6(1), institutions shall use the most recent model setup and calibration and the data inputs corresponding to the period referred to in Article 2(9).
No calculation requirements shall apply to extensions and changes having no direct quantitative impact.
2. Competent authorities shall consider several modifications to the alternative internal model, separately submitted by an institution, as a single model extension or change where such modifications are similar in nature or related in scope. Competent authorities shall consider groups of modifications to the alternative internal model, submitted as a single model extension or change, as separate model extensions or changes where such modifications to the model are not similar in nature or related in scope.
3. In case of doubt on the categorisation referred to in Articles 1 or 4, institutions shall provide the competent authority with an explanatory note justifying their choices of category or sub-category and presenting possible alternatives. The competent authority may change the category or sub-category provided in the request for a permission as referred to in Article 325az(7), first subparagraph, of Regulation (EU) No 575/2013, or the notification as referred to in Article 325az(7), second subparagraph, of that Regulation.
Implementation of changes to, and extensions of, the use of alternative internal models, and of changes to the subset of the modellable risk factors
1. Institutions that have been granted a permission for a material extension of, or change to, the use of alternative internal models, or a material change to the subset of the modellable risk factors, as referred to in Article 325az(7), first subparagraph, of Regulation (EU) No 575/2013, shall calculate their own funds requirements based on the approved extension or change from the date specified in the permission.
2. In case of a delay of the implementation of an extension or change to the use of alternative internal models or a change to the subset of the modellable risk factors for which a competent authority has granted a permission as referred to in Article 325az(7), first subparagraph, of Regulation (EU) No 575/2013, institutions shall, without undue delay:
(a)
notify their competent authority of such a delay;
(b)
submit to their competent authority a plan for a timely implementation of the approved extension or change, to be approved by the competent authority.
3. Institutions that have notified their competent authority of an extension or change and have subsequently decided not to implement such extension or change, shall notify their competent authority thereof without undue delay.
Documentation of extensions and changes to the use of the alternative internal models and changes to the institution’s choice of the subset of modellable risk factors
1. Institutions shall, when they ask their competent authority for a permission as referred to in Article 325az(7), first subparagraph, of Regulation (EU) No 575/2013, provide their competent authority, with all of the following documentation:
(a)
a description of the extension or change to the use of their alternative internal models, or of the change to their choice of the subset of modellable risk factors, and a description of the rationale and objective of that extension or change;
(b)
the implementation date of such extension or change;
(c)
the scope of trading desks affected by the extension or change to the use of the alternative internal model or the change to the institution’s choice of the subset of modellable risk factors including information on the trading volume of those desks;
(d)
technical and process documents;
(e)
reports of the institutions’ independent review or validation;
(f)
a confirmation that the competent body of the institution has, through the institution’s approval processes, approved the extension or change to the use of the alternative internal model or the change to the institution’s choice of the subset of modellable risk factors, and the date of that approval;
(g)
where applicable, any relevant one of the following, together with a justification of representativeness of the period of 15 consecutive business days selected for the quantitative impact:
(i)
the quantitative impact of the extension or change to the use of the alternative internal model on the sum referred to in Article 2(1), point (b)(i);
(ii)
the quantitative impact of the extension or change to the use of the alternative internal model on the relevant risk numbers Rn
i
referred to in Article 2(4);
(iii)
the quantitative impact of the change to the institution’s choice of the subset of modellable risk factors on the sum referred to in Article 2(1), point (b)(i);
(iv)
the quantitative impact of the change to the institution’s choice of the subset of modellable risk factors on the risk number Rn
1 referred to in Article 2(4), point (a),
(v)
the ratio R
change
referred to in Article 5(4);
(h)
information about the potential impact on trading desks that do not fulfil all the requirements of Article 325az(2) of Regulation (EU) No 575/2013 when the institution asks its competent authority for a permission as referred to in Article 325az(7), first subparagraph, of Regulation (EU) No 575/2013, or notifies its competent authority in accordance with Article 325az(7), second subparagraph, of that Regulation, including an estimate of the quantitative impact on the relevant risk numbers Rn
i
referred to in Article 2(4) of this Regulation;
(i)
records of the current and previous version number of the institution’s alternative internal models concerned.
2. For non-material extensions or changes to be notified with additional information, as referred to in Article 1(2), point (a), and Article 4(2), point (a), institutions shall submit, together with the notification, all the documentation referred to in paragraph 1, points (a) to (i), of this Article.
3. For non-material extensions or changes to be notified with basic information, as referred to in Article 1(2), point (b), and Article 4(2), point (b), institutions shall submit, together with the notification, the documentation referred to in paragraph 1, points (a), (b) and (c) and points (f) to (i), of this Article.
4. The reports of the institutions’ independent review or validation referred to in paragraph 1, point (e), of this Article shall contain all the following:
(a)
a verification of the materiality assessment and of the representativeness of the period of 15 consecutive business days used;
(b)
a critical review of the characteristics of the extension or change to the use of the alternative internal model, or change to the institution’s choice of the subset of modellable risk factors, performed in accordance with Article 325bi(2) and Article 325bj of Regulation (EU) No 575/2013;
(c)
a plan for a timely implementation of necessary corrective measures suggested as part of the independent review or validation process.
Entry into force
This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union .
