Article 41 | Delegated Regulation 2022/439

Article 41 - General

Article 41

General

1. In order to assess compliance of an institution with the requirements on quantification of risk parameters, for the purposes of Article 144(1)(a) of Regulation (EU) No 575/2013, competent authorities shall verify the institution’s:

(a)	compliance with the overall requirements for estimation laid down in Article 179 of Regulation (EU) No 575/2013, in accordance with Articles 42, 43 and 44;

(b)	compliance with the requirements specific to PD estimation laid down in Article 180 of Regulation (EU) No 575/2013, in accordance with Articles 45 and 46;

(c)	compliance with the requirements specific to own-LGD estimates laid down in Article 181 of Regulation (EU) No 575/2013, in accordance with Articles 47 to 52;

(d)	compliance with the requirements specific to own-conversion factor estimates laid down in Article 182 of Regulation (EU) No 575/2013, in accordance with Articles 53 to 56;

(e)	compliance with the requirements for assessing the effect of guarantees and credit derivatives laid down in Article 183 of Regulation (EU) No 575/2013, in accordance with Article 57;

(f)	compliance with the requirements for purchased receivables laid down in Article 184 of Regulation (EU) No 575/2013, in accordance with Article 58.

2. For the purposes of the verification under paragraph 1, competent authorities shall apply all of the following methods:

(a)	review the institution’s relevant internal policies;

(b)	review the institution's technical documentation of relevant estimation methodology and process;

(c)	review and challenge the relevant estimation of risk parameter manuals, methodologies and processes;

(d)	review the relevant minutes of the institution’s internal bodies, including the management body, model committee, or other committees;

(e)	review the reports on the performance of risk parameters and the recommendations made by the credit risk control unit, the validation function, the internal audit function or any other control function of the institution;

(f)	assess progress reports on the efforts made by the institution to correct shortcomings and mitigate risks detected during relevant audits, validations and monitoring;

(g)	obtain written statements from or interview the relevant staff and the senior management of the institution.

3. For the purposes of the verification under paragraph 1, competent authorities may also apply any of the following additional methods:

(a)	request the provision of additional documentation or analysis substantiating the institution’s methodological choices and the results obtained;

(b)	conduct their own estimations of risk parameters or replicate those of the institution, using the relevant data supplied by the institution;

(c)	request and analyse the data used in the process of estimation;

(d)	review the functional documentation of the IT systems which are relevant to the scope of the assessment;

(e)	perform their own tests on the data of the institution or request the institution to perform tests proposed by the competent authorities;

(f)	review other relevant documents of the institution.

Recitals

CHAPTER 1 - GENERAL PROVISIONS ON THE ASSESSMENT METHODOLOGY (Article 1-5)

CHAPTER 2 - ASSESSMENT METHODOLOGY FOR SEQUENTIAL IMPLEMENTATION PLANS AND PERMANENT PARTIAL USE OF THE STANDARDISED APPROACH (Article 6-8)

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)

CHAPTER 4 - ASSESSMENT METHODOLOGY FOR USE TEST AND EXPERIENCE TEST (Article 18-22)

CHAPTER 5 - ASSESSMENT METHODOLOGY FOR ASSIGNMENT OF EXPOSURES TO GRADES OR POOLS (Article 23-25)

CHAPTER 6 - ASSESSMENT METHODOLOGY FOR IDENTIFICATION OF DEFAULTS (Article 26-29)

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

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)

SECTION 3 - Methodology for assessing requirements specific for PD estimation (Article 45-46)

SECTION 4 - Methodology for assessing requirements specific to own-LGD estimates (Article 47-52)

SECTION 5 - Methodology for assessing requirements specific to own- conversion factor estimates (Article 53-56)

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

SECTION 7 - Methodology for assessing the requirements for purchased receivables (Article 58)

CHAPTER 9 - ASSESSMENT METHODOLOGY FOR ASSIGNMENT OF EXPOSURES TO EXPOSURE CLASSES (Article 59-62)

CHAPTER 10 - ASSESSMENT METHODOLOGY FOR STRESS TEST USED IN ASSESSMENT OF CAPITAL ADEQUACY (Article 63-66)

CHAPTER 11 - ASSESSMENT METHODOLOGY FOR THE CALCULATION OF OWN FUNDS REQUIREMENTS (Article 67-71)

CHAPTER 12 - ASSESSMENT METHODOLOGY FOR DATA MAINTENANCE (Article 72-75)

CHAPTER 13 - ASSESSMENT METHODOLOGY OF INTERNAL MODELS FOR EQUITY EXPOSURES (Article 76-82)

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

CHAPTER 15 - FINAL PROVISION (Article 85)

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Article 41 - General

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