Use test in corporate governance functions
Article 21
1. When assessing whether internal ratings and default and loss estimates of the rating systems used in the calculation of own funds requirements play an essential role in the institution’s corporate governance functions as referred to in Article 144(1)(b) of Regulation (EU) No 575/2013, competent authorities shall assess whether these ratings and estimates play an important role in: (a) the management reporting; (b) the monitoring of the credit risk at the portfolio level. 2. Where institutions take into consideration internal ratings and default and loss estimates in any of the following areas, competent authorities shall assess how taking those elements into consideration contributes to those ratings and estimates playing an essential role in the institution’s corporate governance functions referred to in paragraph 1: (a) the internal audit planning; (b) the design of the remuneration policies.