+Article 12 3

Article 12 3

3.   For the purposes of paragraph 2, point (b), competent authorities shall:

(a)

verify whether the internal policies of the institution ensure that the internal periodic validation is performed at least annually, and each time significant structural changes in the market or changes to the composition of the portfolio occur that may lead to the internal model no longer being adequate, including the following:

(i)

a number of overshootings that deviate significantly from the number anticipated by the model calibration;

(ii)

large market losses relative to the level predicted by risk metrics;

(iii)

a significant change in the institution’s business that may challenge the modelling assumptions;

(iv)

unusual and significant misalignments between the theoretical and hypothetical changes to the portfolios’ values;

(b)

verify whether the internal periodic validation is based on a work plan, approved by the management body, and that that work plan sets out:

(i)

the scope of the internal validation;

(ii)

the tasks performed by the validation unit;

(iii)

the priorities of the internal validation;

(c)

assess how the work plan referred to in point (b) ensures that a comprehensive and risk-oriented internal validation process is performed, and that relevant aspects are not omitted from the scope of the internal validation.

1. Panoramica

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1.1 Riferimenti

1.2 Requisiti identificati

1.3 Standard correlati

2. Requisiti identificati

Requisiti

3. Standard correlati

Standard