Delegated Regulation 2022/439

Commission Delegated Regulation (EU) 2022/439 of 20 October 2021 supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to regulatory technical standards for the specification of the assessment methodology competent authorities are to follow when assessing the compliance of credit institutions and investment firms with the requirements to use the Internal Ratings Based Approach (Text with EEA relevance)

CHAPTER 1 - GENERAL PROVISIONS ON THE ASSESSMENT METHODOLOGY (Article 1-5)Article 1 - Assessment of compliance with requirements to use the Internal Ratings Based Approach Article 2 - Methods to be applied by competent authorities Article 3 - Quality of documentation Article 4 - Third party involvement Article 5 - Temporary non-compliance with the requirements of the IRB Approach

CHAPTER 2 - ASSESSMENT METHODOLOGY FOR SEQUENTIAL IMPLEMENTATION PLANS AND PERMANENT PARTIAL USE OF THE STANDARDISED APPROACH (Article 6-8)Article 6 - General Article 7 - Sequential implementation of the IRB Approach Article 8 - Conditions for permanent partial use

CHAPTER 3 - ASSESSMENT METHODOLOGY FOR THE FUNCTION OF VALIDATION OF INTERNAL ESTIMATES AND OF THE INTERNAL GOVERNANCE AND OVERSIGHT OF AN INSTITUTION (Article 9-17)

SECTION 1 - General provisions (Article 9)Article 9 - General

SECTION 2 - Methodology for assessing the validation function (Article 10-13)Article 10 - Independence of the validation function Article 11 - Completeness and frequency of the validation process Article 12 - Adequacy of the methods and procedures of the validation function Article 13 - Soundness of the reporting process and the process for addressing the validation conclusions, findings and recommendations

SECTION 3 - Methodology for assessing internal governance and oversight (Article 14-17)Article 14 - The role of senior management and management body Article 15 - Management reporting Article 16 - Credit risk control unit Article 17 - Internal audit

CHAPTER 4 - ASSESSMENT METHODOLOGY FOR USE TEST AND EXPERIENCE TEST (Article 18-22)Article 18 - General Article 19 - Use test in risk management, decision-making and credit approval process Article 20 - Use test in the internal capital allocation Article 21 - Use test in corporate governance functions Article 22 - Experience test

CHAPTER 5 - ASSESSMENT METHODOLOGY FOR ASSIGNMENT OF EXPOSURES TO GRADES OR POOLS (Article 23-25)Article 23 - General Article 24 - Assignment definitions, processes and criteria Article 25 - Integrity of assignment process

CHAPTER 6 - ASSESSMENT METHODOLOGY FOR IDENTIFICATION OF DEFAULTS (Article 26-29)Article 26 - General Article 27 - Triggers for identification of the default of an obligor Article 28 - Robustness and effectiveness of the process of identifying the default of an obligor Article 29 - Reclassification to non-default status

CHAPTER 7 - ASSESSMENT METHODOLOGY FOR RATING SYSTEMS DESIGN, OPERATIONAL DETAILS AND DOCUMENTATION (Article 30-40)

SECTION 1 - General (Article 30)Article 30 - General

SECTION 2 - Methodology for assessing the documentation on the rationale, design and operational details of rating systems (Article 31-32)Article 31 - Completeness of the documentation of rating systems Article 32 - Register of rating systems

SECTION 3 - Methodology for assessing the structure of rating systems (Article 33-36)Article 33 - Risk drivers and rating criteria Article 34 - Distribution of obligors and exposures in the grades or pools Article 35 - Risk differentiation Article 36 - Homogeneity

SECTION 4 - Methodology for assessing specific requirements for statistical models or other mechanical methods (Article 37-40)Article 37 - Data requirements Article 38 - Model design Article 39 - Human judgement Article 40 - Model performance

CHAPTER 8 - ASSESSMENT METHODOLOGY FOR RISK QUANTIFICATION (Article 41-58)

SECTION 1 - General (Article 41)Article 41 - General

SECTION 2 - Methodology for assessing overall requirements for quantification of risk parameters (Article 42-44)Article 42 - Data requirements Article 43 - Review of estimates Article 44 - Margin of conservatism

SECTION 3 - Methodology for assessing requirements specific for PD estimation (Article 45-46)Article 45 - Length of the historical observation period Article 46 - Method of PD estimation GL

SECTION 4 - Methodology for assessing requirements specific to own-LGD estimates (Article 47-52)Article 47 - Length of the historical observation period Article 48 - Method of LGD estimation GL Article 49 - Treatment of multiple defaults Q&A Article 50 - Use of LGD estimates appropriate for economic downturn Article 51 - LGD, ELBE and UL estimation for exposures in-default GL Article 52 - Requirements on collateral management, legal certainty and risk management

SECTION 5 - Methodology for assessing requirements specific to own- conversion factor estimates (Article 53-56)Article 53 - Length of the historical observation period Article 54 - Method of conversion factors estimation Article 55 - Use of conversion factor estimates appropriate for economic downturn Article 56 - Requirements on policies and strategies for account monitoring and payment processing

SECTION 6 - Methodology for assessing the effect of guarantees and credit derivatives (Article 57)Article 57 - Eligibility of guarantors and guarantees

SECTION 7 - Methodology for assessing the requirements for purchased receivables (Article 58)Article 58 - Risk parameter estimates for purchased corporate receivables

CHAPTER 9 - ASSESSMENT METHODOLOGY FOR ASSIGNMENT OF EXPOSURES TO EXPOSURE CLASSES (Article 59-62)Article 59 - General Article 60 - Assignment methodology and its implementation Article 61 - Assigning sequence Article 62 - Specific requirements for retail exposures

CHAPTER 10 - ASSESSMENT METHODOLOGY FOR STRESS TEST USED IN ASSESSMENT OF CAPITAL ADEQUACY (Article 63-66)Article 63 - General Article 64 - Adequacy of methods used in designing the stress tests Article 65 - Organisation of the stress testing process Article 66 - Integration of the stress tests in the risk and capital management processes

CHAPTER 11 - ASSESSMENT METHODOLOGY FOR THE CALCULATION OF OWN FUNDS REQUIREMENTS (Article 67-71)Article 67 - General Article 68 - Reliability of the system used for the calculation of own funds requirements Article 69 - Data quality Article 70 - Correctness of the implementation of the methodology and procedures for different exposure classes Article 71 - Organisation of the process for the calculation of own funds requirements

CHAPTER 12 - ASSESSMENT METHODOLOGY FOR DATA MAINTENANCE (Article 72-75)Article 72 - General Article 73 - Data quality Article 74 - Data documentation and reporting Article 75 - IT infrastructure

CHAPTER 13 - ASSESSMENT METHODOLOGY OF INTERNAL MODELS FOR EQUITY EXPOSURES (Article 76-82)Article 76 - General Article 77 - Adequacy of the data Article 78 - Adequacy of the models Article 79 - Comprehensiveness of the stress-testing programme Article 80 - Integrity of the model and modelling process Article 81 - Adequacy of assignment of exposures to the internal models approach Article 82 - Adequacy of the validation function

CHAPTER 14 - ASSESSMENT METHODOLOGY FOR MANAGEMENT OF CHANGES TO RATING SYSTEMS (Article 83-84)Article 83 - General Article 84 - Change policy content

CHAPTER 15 - FINAL PROVISION (Article 85)Article 85 - Entry into force

Metadata

EBA webpage on this legal act

Timeline

Delegated Regulation 2022/439