Article 76
General
1. When assessing whether an institution is able to develop and validate the internal model for equity exposures and to assign each exposure to the range of application of an internal models approach for equity exposures as required by points (f) and (h) of Article 144(1) and Articles 186, 187 and 188 of Regulation (EU) No 575/2013, competent authorities shall evaluate all of the following:
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(a) |
the adequacy of the data used, in accordance with Article 77; |
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(b) |
the adequacy of the models, in accordance with Article 78; |
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(c) |
the comprehensiveness of the stress-testing programme, in accordance with Article 79; |
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(d) |
the integrity of the model and modelling process, in accordance with Article 80; |
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(e) |
the adequacy of the assignment of exposures to the internal models approach, in accordance with Article 81; |
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(f) |
the adequacy of the validation function, in accordance with Article 82. |
2. For the purposes of the evaluation under paragraph 1, competent authorities shall apply all of the following methods:
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(a) |
review the institution’s relevant internal policies and procedures; |
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(b) |
review the institution’s technical documentation on the methodology and process of the development of the internal model for equity exposures; |
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(c) |
review and challenge the relevant development manuals, methodologies and processes; |
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(d) |
review the roles and responsibilities of the different units and internal bodies involved in the design, validation and application of the internal model for equity exposures; |
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(e) |
review the relevant minutes of the institution’s internal bodies, including the management body, or committees; |
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(f) |
review the relevant reports on the performance of the internal models for equity exposures and the recommendations by the credit risk control unit, validation function, internal audit function or any other control function of the institution; |
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(g) |
review the relevant progress reports on the efforts made by the institution to correct shortcomings and mitigate risks detected during monitoring, validations and audits; |
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(h) |
obtain written statements from or interview the relevant staff and senior management of the institution. |
3. For the purposes of the evaluation under paragraph 1, competent authorities may also apply any of the following additional methods:
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(a) |
request and analyse data used in the process of development of internal models for equity exposures; |
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(b) |
conduct their own or replicate the institution’s Value at Risk estimations using relevant data supplied by the institution; |
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(c) |
request the provision of additional documentation or analysis substantiating the methodological choices and the results obtained; |
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(d) |
review the functional documentation of the IT systems used for the value at risk calculation; |
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(e) |
review other relevant documents of the institution. |