Article 10
Independence of the validation function
1. When assessing the independence of the validation function for the purposes of Article 144(1)(f), Article 174(d), Article 185 and Article 188 of Regulation (EU) No 575/2013, competent authorities shall verify that the unit responsible for the validation function or, where there is no separate unit dedicated only to the validation function, the staff performing the validation function fulfils all of the following:
|
(a) |
the validation function is independent from the personnel and management function responsible for originating or renewing exposures and for the model design or development; |
|
(b) |
the staff performing the validation function is different from the staff responsible for the design and development of the rating system, and from the staff responsible for the credit risk control function; |
|
(c) |
it reports directly to senior management. |
2. For the purposes of paragraph 1, where the unit responsible for the validation function is organisationally separate from the credit risk control unit and each unit reports to different members of the senior management, competent authorities shall verify, both of the following:
|
(a) |
that the validation function has adequate resources, including experienced and qualified personnel to perform its tasks; |
|
(b) |
that the remuneration of the staff and senior managers responsible for the validation function is not linked to the performance of the tasks relating to either credit risk control or to originating or renewing exposures. |
3. For the purposes of paragraph 1, where the unit responsible for the validation function is organisationally separate from the credit risk control unit, and both units report to the same member of the senior management, competent authorities shall verify all of the following:
|
(a) |
that the validation function has adequate resources, including experienced and qualified personnel to perform its tasks; |
|
(b) |
that the remuneration of the staff and senior managers responsible for the validation function is not linked to the performance of the tasks relating to either credit risk control or to originating or renewing exposures; |
|
(c) |
that there is a decision-making process in place to ensure that the conclusions, findings and recommendations of the validation function are properly taken into account by the senior management of the institution; |
|
(d) |
that no undue influence is exercised on the conclusions, findings and recommendations of the validation function; |
|
(e) |
that all necessary corrective measures to address the conclusions, findings and recommendations of the validation function are decided and implemented in a timely manner; |
|
(f) |
that internal audit regularly assesses the fulfilment of the conditions referred to in points (a) to (e). |
4. For the purposes of paragraph 1, where there is no separate unit responsible for the validation function, competent authorities shall verify all of the following:
|
(a) |
that the validation function has adequate resources, including experienced and qualified personnel to perform its tasks; |
|
(b) |
that the remuneration of the staff and senior managers responsible for the validation function is not linked to the performance of the tasks relating to either credit risk control or to originating or renewing exposures; |
|
(c) |
that there is a decision-making process in place to ensure that the conclusions, findings and recommendations of the validation function are properly taken into account by the senior management of the institution; |
|
(d) |
that no undue influence is exercised on the conclusions, findings and recommendations of the validation function; |
|
(e) |
that all necessary corrective measures to address the conclusions, findings and recommendations of the validation function are decided and implemented in a timely manner; |
|
(f) |
that internal audit regularly assesses the fulfilment of the conditions referred to in points (a) to (e); |
|
(g) |
that there is effective separation between the staff performing the validation function and the staff performing the other tasks; |
|
(h) |
that the institution is not a global or other systemically important institution in the meaning of Article 131 of Directive 2013/36/EU. |
5. When assessing the independence of the validation function, competent authorities shall also assess whether the choice of the institution with regard to the organisation of the validation function as referred to in paragraphs 2, 3 and 4 is adequate, taking into account the nature, size and scale of the institution and the complexity of the risks inherent in its business model.