1.   When assessing whether internal ratings and default and loss estimates of the rating systems used in the calculation of the own funds requirements play an essential role in the institution’s risk management and decision-making process and in its credit approval as required by Article 144(1)(b) of Regulation (EU) No 575/2013, with regard to assignment to grades or pools in accordance with Article 171(1), point (c), and (2), of that Regulation, with regard to assignment of exposures in accordance with Article 172(1), points (a), (b) and (c), of that Regulation and with regard to documentation of rating systems in accordance with Article 175(3) of that Regulation, the competent authorities shall verify that:

(a)	the number of non-rated exposures and outdated ratings is immaterial;

(b)

those internal ratings and default and loss estimates play an important role, in particular, when: (i) making decisions on the approval, rejection, restructuring and renewal of a credit facility; (ii) drawing up the lending policies by influencing either the maximum exposure limits, the mitigation techniques and credit enhancements required or any other aspect of the institution’s global credit risk profile; (iii) carrying out the monitoring process of obligors and exposures;

2.   Where institutions use internal ratings and default and loss estimates in any of the following areas, competent authorities shall assess how that use contributes to those ratings and estimates playing an essential role in the institution’s risk management and decision-making processes and in its credit approval as referred to in paragraph 1:

(a)	the pricing of each credit facility or obligor;

(b)	the early warning systems used for the credit risk management;

(c)	the determination and implementation of the collection and recovery policies and processes;

(d)	the calculation of credit risk adjustments where this is in line with the applicable accounting framework;

(e)	the allocation or delegation of competence for the credit approval process by the management board to internal committees, to the senior management and to the staff.