Risk policies and processes

The management body should, based on its overall CSRBB strategy, adopt robust risk policies, processes and systems which should ensure that:

• (a) Procedures for updating scenarios for the assessment and monitoring of CSRBB are set up;
• (b) the measurement approach and the corresponding assumptions for assessing and monitoring CSRBB risks, are appropriate and proportional;
• (c) the assumptions of the models used are regularly reviewed and, if necessary, amended;
• (d) standards for the evaluation of positions and the measuring of performance are defined; and
• (e) the lines of authority and responsibility for managing CSRBB exposures are defined.

The policies should be well reasoned, robust and documented and should address all CSRBB components that are impor tant to the institution’s individual circumstances. Without prejudice to the proportionality principle, the CSRBB policies should include the following:

• (a) The application of the boundary between ‘non - trading book’ and ‘trading book’. Internal risk transfers between the banking book and the trading book should be properly documented and monitored;
• (b) The size and the form of the spread shocks to be used for internal CSRBB calculations respectively.

To ensure that the institution’s CSRBB management policies and pr ocedures remain appropriate and sound, the management body or its delegates should review the CSRBB management policies and procedures in the light of the outcomes of regular reports.

The management body or its delegates should ensure that analysis and risk management activities related to CSRBB are conducted by sufficient and competent staff with technical knowledge and experience, consistent with the nature and scope of the institution’s activities.