+Article 32 4

Article 32 4

4.   When assessing whether an institution’s internal model is implemented with integrity as required by Article 325bi(1) of Regulation (EU) No 575/2013 in relation to the modellability assessment of risk factors that are assessed as modellable in accordance with Article 6 of Delegated Regulation (EU) 2022/2060, competent authorities shall:

(a)

in relation to the results of the modellability assessment:

(i)

by using the inventory referred to in paragraph 1, point (b), verify whether the buckets of the curve, surface or cube modelled through a parametric function that are assessed as modellable meet any of the two conditions referred to in Article 4(2), points (a) and (b), of Delegated Regulation (EU) 2022/2060;

(ii)

by using the inventory referred to in paragraph 1, point (b), verify whether:

(1)

the institution uses the bucketing approach set out in Article 5(2) of Delegated Regulation (EU) 2022/2060;

(2)

any conversion of buckets into a different market-standard convention in accordance with Article 5(2), point (d), of that Regulation is appropriate;

(iii)

by using the inventory referred to in paragraph 1, point (b), verify whether the institution assesses the function parameter as modellable only where all points in the curve, surface or cube that are used to calibrate that function parameter belong to buckets that are modellable;

(b)

in relation to the requirements for considering a price verifiable as referred to in Article 2 of Delegated Regulation (EU) 2022/2060:

(i)

verify whether:

(1)

the institution’s internal systems and policies, and its contractual arrangements with third-party vendors, ensure that the conditions referred to in Article 2(1) of Delegated Regulation (EU) 2022/2060 are met;

(2)

there are no prices that meet the conditions referred to in Article 2(2) of Delegated Regulation (EU) 2022/2060 that are considered verifiable;

(ii)

by reviewing the audit reports, verify whether the independent audit to which third-party vendors are subject is robust and covers all aspects referred to in Article 2(6) of Delegated Regulation (EU) 2022/2060;

(iii)

where applicable, review the contractual arrangements between the institution and the third-party vendors referred to in Article 2(7) of Delegated Regulation (EU) 2022/2060;

(c)

in relation to the requirements for allocating a verifiable price to a bucket as referred to in Article 4(4) of Delegated Regulation (EU) 2022/2060, verify whether the mapping process and the criteria referred to in Article 7(1), point (d), of that Regulation used to determine that a price is representative for a point in the bucket are sound;

(d)

in relation to the possibility of reallocating a verifiable price of a bucket to an adjacent bucket in accordance with Article 5(5) of Delegated Regulation (EU) 2022/2060, verify:

(i)

whether the approach documented in accordance with Article 7(1), point (f), of that Regulation used by the institution in performing such reallocation is appropriate;

(ii)

how the institution ensures that the conditions under which reallocation is allowed in accordance with Article 5(5) of Delegated Regulation (EU) 2022/2060 are fulfilled.

For the purposes of point (b)(i), competent authorities shall apply the assessment method referred to in paragraph 5.

For the purposes of point (c), competent authorities shall apply the assessment method referred to in paragraph 7.

1. Ħarsa ġenerali

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1.1 Referenzi

1.2 Rekwiżiti identifikati

1.3 Standards relatati

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3. Standards relatati

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