2. For curves for which the institution establishes buckets itself in accordance with Article 5(4) of Delegated Regulation (EU) 2022/2060, competent authorities shall verify that:
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(a)
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the institution’s internal policies have established criteria to decide on the numbers of risk factors to be used to model a curve, and that such criteria are based on the liquidity and materiality of the positions with exposure to that curve;
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(b)
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the criteria referred to in point (a) are accompanied by an analysis showing that the number of risk factors used allows for the volatility across different tenors to be captured.
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For the purposes of point (b), where the competent authority considers that the number of risk factors used to model a curve are not appropriate, competent authorities may complement their assessment using the assessment method referred to in paragraph 3.