Circular NBB_2015_30 / Information disclosure requirements for approval applications for measures under Article 308 bis of Directive 2009/138/EC

NBB_2015_30 – 9 December 2015 Circular – P. 1/13 boulevard de Berlaimont 14 – BE-1000 Brussels tel. +32 2 221 38 12 – fax + 32 2 221 31 04 company number: 0203.201.340 RPM Brussels www.bnb.be

Circular
Brussels, 9 December 2015
Reference: NBB_2015_30 your correspondent:
Kajal Vandenput tel. +32 2 221 51 77 – fax +32 2 221 31 04 kajal.vandenput@nbb.be

Information disclosure requirements to the Bank in the context of approval applications for the use of one or more measures as referred to in Article 308 bis of Directive 2009/138/EC

Scope
Belgian insurance and reinsurance undertakings.
Belgian insurance or reinsurance holding companies.
Belgian mixed financial holding companies.

Summary/Objectives
This circular aims to explain the Bank's information disclosure requirements in the context of approval applications for the use of one or more measures as referred to in Article 308 bis.

Structure
I. Context
II. Information disclosure requirements to the Bank in the context of approval procedures under Solvency II (art. 308 bis)
III. Information disclosure requirements to the Bank in the context of approval procedures for the use of the matching adjustment (art. 77 ter Matching Adjustment)
IV. Information disclosure requirements to the Bank in the context of the notification for the use of the volatility adjustment (art. 77 quinquies Volatility Adjustment)
V. Information disclosure requirements to the Bank in the context of approval procedures for the use of transitional measures (art. 308 quater and 308 quinquies Transitional Measure on the risk-free interest rates and Transitional Measure on technical provisions)
VI. Information disclosure requirements to the Bank in the context of approval procedures for the consideration of ancillary own funds items (art. 90 Ancillary Own Funds)
VII. Information disclosure requirements to the Bank in the context of approval procedures for the consideration of own funds items not on the list of own funds items (art. 95 Own Funds items not on the list of items referred to in Art. 97)
VIII. Information disclosure requirements to the Bank in the context of approval procedures for the replacement of a subset of parameters in the standard formula design with undertaking-specific parameters (art. 104 §7 Undertaking Specific Parameters)
IX. Information disclosure requirements to the Bank in the context of approval procedures for the establishment of special purpose vehicles on the territory (art. 211 Special Purpose Vehicles)
X. Information disclosure requirements to the Bank in the context of approval procedures for the use of the duration-based equity sub-module (art. 304 Duration-based equity sub-module)
XI. Transitional measurement requirements for the equity sub-module (art. 308 ter §13 Equity transitional)
XII. Information disclosure requirements to the Bank in the context of approval procedures for the use of an internal model (partial) (art. 112 Full and Partial Internal Models and art. 230-231 Group Internal Model)
XIII. Assessment procedure by the Bank and approval deadlines
XIV. Entry into force

Madam,
Sir,

I. Context
It seems important in the context of the introduction of Solvency II to improve transparency and provide certain clarifications regarding information disclosure requirements and approval procedures for the various measures as provided for in Article 308 bis (phased-in introduction) of Directive 2009/138/EC.
The use of certain measures falling under the phased-in introduction of Solvency II requires prior approval by the Bank based on a complete application file from the undertaking.
Approval by the Bank will only be granted on an individual basis, taking into account specific requirements and additional relevant elements for the assessment.
This circular specifies the specific information disclosure requirements and procedures to be followed during the approval processes.

II. Information disclosure requirements to the Bank in the context of Solvency II approval procedures (art. 308 bis Phased-in Introduction)
Undertakings intending to submit an application for approval of one or more of the measures described below in the context of the entry into force of Solvency II are required to provide certain specific and relevant information to the Bank:

• the matching adjustment (art. 77 ter of Directive 2009/138/EC) [Matching Adjustment];
• the volatility adjustment (art. 77 quinquies of Directive 2009/138/EC) [Volatility Adjustment];

NBB_2015_30 – 9 December 2015 Circular – P. 3/13

• the transitional measure on risk-free interest rates (art. 308 quater of Directive 2009/138/EC) [Transitional Adjustment];
• the transitional measure on technical provisions (art. 308 quinquies of Directive 2009/138/EC) [Transitional Deduction];
• ancillary own funds (art. 90 of Directive 2009/138/EC) [Ancillary Own Funds];
• own funds items not on the list of own funds items (art. 95 of Directive 2009/138/EC) [Own Funds items not on the list of items referred to in Art. 97];
• the replacement of a subset of parameters in the standard formula design with undertaking-specific parameters (art. 104 §7 of Directive 2009/138/EC) [Undertaking Specific Parameters];
• the establishment of special purpose vehicles on the territory (art. 211 of Directive 2009/138/EC) [Establishment of Special Purpose Vehicles];
• the duration-based equity sub-module (art. 304 of Directive 2009/138/EC) [Duration-based equity sub-module];
• the use of an internal model (partial) (art. 112 and 230-231 of Directive 2009/138/EC) [Full and Partial Internal Model].

In order to assess the use and impact of these different measures (in isolation or in combination), undertakings intending to use one or more of the measures described above are required to submit the information as described in Annex 1 (see table Annex 1 Impact measures.xls).

III. Information disclosure requirements to the Bank in the context of approval procedures for the use of the matching adjustment (art. 77 ter Matching Adjustment)
In its assessment of the compliance and eligibility of the use of the matching adjustment, the Bank will take into account the specific requirements and criteria relating to the use of the matching adjustment as defined in Article 77 ter of Directive 2009/138/EC, taking into consideration all elements comprising the application file as specified in Commission Implementing Regulation (EU) 2015/500 of 24 March 2015 (available on the following website: http://eur-lex.europa.eu/legal-content/FR/TXT/PDF/?uri=OJ:JOL_2015_079_R_0005&from=EN) and the EIOPA guidelines of 2 February 2015 on the implementation of long-term guarantee measures (available on the EIOPA website: https://eiopa.europa.eu/publications/eiopaguidelines/guidelines-on-the-implementation-of-the-long-term-guarantee-measures). Undertakings are furthermore expected to meet the following requirements regarding their risk management system:

i. Liquidity plan (art. 44 §2)
Undertakings are required, pursuant to Article 44, § 2, of Directive 2009/138/EC, to establish a liquidity plan comprising a forecast of incoming and outgoing cash flows relating to the assets and liabilities subject to the matching adjustment.

ii. Sensitivity analysis (art. 44 §2 bis b)
Regarding asset and liability management, undertakings are required, pursuant to Article 44, § 2 bis b) of Directive 2009/138/EC, to regularly assess the sensitivity of their technical provisions and eligible own funds to the assumptions underlying the calculation of the matching adjustment, including the calculation of the fundamental solvency margin referred to in Article 77 quater, paragraph 1, point b), the potential effect of a forced sale of assets on their eligible own funds, changes in the composition of the portfolio of assigned assets, and finally, the consequences of a reduction of the matching adjustment to zero.

In the event that the reduction of the matching adjustment to zero would result in non-compliance with the solvency capital requirement, the undertaking must also submit an analysis of the measures it could take to restore the level of eligible own funds corresponding to the solvency capital requirement or to reduce the risk profile in order to ensure compliance with the solvency capital requirement.

iii. ORSA (art. 45 §2 bis)
In the context of the internal assessment of risks and solvency (ORSA), undertakings are required, pursuant to art. 45 §2 bis of Directive 2009/138/EC, to assess compliance with capital requirements, on the one hand, taking into account and on the other hand, without taking into account the matching adjustment referred to in Article 77 ter. This assessment must take into account sufficiently adapted assumptions and different economic circumstances.

If an undertaking wishes to use the matching adjustment in the context of the entry into force of Solvency II, the Bank requests it to include in the application file the information as described in points i., ii. and iii., namely the liquidity plan, sensitivity analyses of assumptions, any analyses of measures it could take in case of non-compliance with the solvency capital requirement, and the internal assessment of risks and solvency report.

IV. Information disclosure requirements to the Bank in the context of the notification for the use of the volatility adjustment (art. 77 quinquies Volatility Adjustment)
Undertakings intending to use a volatility adjustment as defined in Article 77 quinquies of Directive 2009/138/EC are required to notify the Bank in advance by means of a notification letter. We refer to the EIOPA guidelines of 2 February 2015 on the implementation of long-term guarantee measures (available on the EIOPA website: https://eiopa.europa.eu/publications/eiopaguidelines/guidelines-on-the-implementation-of-the-long-term-guarantee-measures). Undertakings are furthermore expected to comply with the following requirements regarding their risk management system:

i. Liquidity plan (art. 44 §2)
Undertakings are required, pursuant to Article 44 §2 of Directive 2009/138/EC, to establish a liquidity plan comprising an estimate of incoming and outgoing cash flows relating to the assets and liabilities subject to the volatility adjustment.

ii. Sensitivity analysis (art. 44 §2 bis)
Regarding asset and liability management, undertakings are required, pursuant to Article 44 §2 bis c) of Directive 2009/138/EC, to regularly assess the sensitivity of their technical provisions and eligible own funds to the assumptions underlying the calculation of the volatility adjustment, the potential effect of a forced sale of assets on their eligible own funds, and finally, the consequences of a reduction of the volatility adjustment to zero.

In the event that the reduction of the volatility adjustment to zero would result in non-compliance with the solvency capital requirement, the undertaking must also submit an analysis of the measures it could take to restore the level of eligible own funds corresponding to the solvency capital requirement or to reduce the risk profile in order to ensure compliance with the solvency capital requirement.

NBB_2015_30 – 9 December 2015 Circular – P. 5/13 If applicable, the aforementioned analysis must be consistent with the phasing-in plan mentioned in point V.ii.b.7 of this circular.

iii. ORSA (art. 45 §2 bis)
In the context of the internal assessment of risks and solvency (ORSA), undertakings are required, pursuant to art. 45 §2 bis of Directive 2009/138/EC, to assess compliance with capital requirements, taking into account and without taking into account the volatility adjustment referred to in Article 77 quinquies of Directive 2009/138/EC. This assessment must take into account sufficiently adapted assumptions and different economic circumstances.

The notification letter addressed to the Bank must include a confirmation that these risk management system requirements are met. These various assessment elements must be documented internally and must be available for verification by the Bank.

V. Information disclosure requirements to the Bank in the context of approval procedures for the use of transitional measures (art. 308 quater and quinquies Transitional Measures)

a. Calculation basis for the two transitional measures (art. 308 quater and quinquies) The calculation and application of the transitional measures must be in line with the EIOPA guidelines of 2 February 2015 on the implementation of long-term guarantee measures (available on the EIOPA website: https://eiopa.europa.eu/publications/eiopaguidelines/guidelines-on-the-implementation-of-the-long-term-guarantee-measures).

Furthermore, the following clarifications are provided regarding the calculation basis for the two specific transitional measures:

i. Transitional measure on risk-free interest rates (art. 308 quater)
This measure applies by means of a parallel adjustment to the risk-free rate curve used in the Best Estimate calculations for the eligible portfolio referred to in Article 20 of Directive 2002/83/EC on the last date of application of said Directive. For this portfolio, the adjustment is calculated by taking the difference between the Solvency I single discount rate SI i as referred to in Article 308 quater §2a) of Directive 2009/138/EC and the Solvency II single discount rate SII i as referred to in Article 308 quater §2b). These two respective rates are calculated as follows:

Calculation of the Solvency I single discount rate

∑ ∑
CFk / (1 + SI i_k)^k j CFk / (1 + j SI i_k)^k

Where

• CFk represents the value of undiscounted expected cash-flows at maturity k of the eligible portfolio.
• The parameter j denotes a set of contracts with an identical technical interest rate
• j CFk represents the value of undiscounted cash-flows at maturity k of the set of contracts with technical interest rate j SI i_k,

With ∑ j CFk = CFk

Calculation of the Solvency II single discount rate

SII i_k = CFk / ∑ BE

Where

• CFk represents the expected value of undiscounted cash-flows at maturity k of the eligible portfolio
• SII BE represents the Best Estimate of the eligible portfolio

The transitional adjustment must be recalculated whenever the SI i rate or the SII i rate changes, given that these rates will never be identical from one quarter to the next. The transitional adjustment must be recalculated on a quarterly basis. The Best Estimate of the eligible portfolio must then be recalculated with the new rate curve, adapting the assumptions relating to policyholder behaviour if necessary so as not to alter the relevance of these assumptions.

EIOPA provides monthly post-shock risk-free rate curves to be used in the calculation of the SCR interest rate risk sub-modules. The use of a transitional curve for the calculation of the Best Estimate of the eligible portfolio implies the use of a post-shock rate curve for the calculation of these sub-modules. The undertaking must itself construct these new post-shock transitional curves. Furthermore, the undertaking must also calculate the impact of the transitional adjustment on the Best Estimate, own funds, and the SCR. The impact must be included in the S.22.04.01 reporting template on an annual basis.

Given the frequency, scope, and complexity of the additional calculations related to this transitional measure, undertakings wishing to use it are expected to document in detail the calculation of the transitional adjustment and its impact on the various balance sheet items and the SCR. This documentation must be validated by the actuarial function and included in the application file.

ii. Transitional measure on technical provisions (art. 308 quinquies)
The technical provisions referred to in Article 308 quinquies §2b) of Directive 2009/138/EC are calculated in accordance with Article 15 of Directive 73/239/EC, Article 20 of Directive 2002/83/EC, and Article 32 of Directive 2005/68/EC on the day preceding the repeal of said Directives pursuant to Article 310 of Directive 2009/138/EC.

The transitional measure on technical provisions can be applied by homogeneous risk groups. This transitional measure, on a given perimeter, is not compatible with the application of the rate transitional measure (art. 308 quater), but is compatible with the use of the volatility adjustment (VA, art. 77 quinquies) and the matching adjustment (MA, art. 77 ter).

The amount of the transitional deduction is calculated by taking the difference between Solvency II technical provisions and Solvency I technical provisions on the portfolio of contracts existing on 1 January 2016. These also include the supplementary provision constituted pursuant to Article 31 §3 of the Royal Decree of 14 November 2003. The maximum deductible share decreases linearly at the end of each year, from 100% for the first year starting on 1 January 2016 to 0% on 1 January 2032.

NBB_2015_30 – 9 December 2015 Circular – P. 7/13

The transitional deduction must be limited such that its application can in no case result in lower financial resource requirements applicable to the entire undertaking (i.e., the sum of technical provisions on the Solvency II balance sheet and the total SCR) compared to those calculated under Solvency I (i.e., the sum of technical provisions, including the supplementary provision and the required solvency margin). Undertakings must ensure to take this cap into account in their calculation and are required to include it, if applicable, in Solvency II reporting (see Annex 2, Annex 2 LTG reporting template.xls, tab S.22.05.01).

Furthermore, the Bank requests, pursuant to Article 308 quinquies §3 of Directive 2009/138/EC, that the amounts of technical provisions, if applicable including the amount of the volatility adjustment, used in the calculation of the transitional deduction, be recalculated on a biennial basis. These calculations must be sufficiently documented to be verifiable.

The evolution of the supplementary provision must also be taken into account during each recalculation of the transitional deduction. This depends on decisions by the Bank regarding possible exemptions from provisioning. In this context, it should be assumed that the Bank will align its exemption criteria with those included in the draft Royal Decree on the annual statutory accounts of insurance and reinsurance undertakings.

b. Information disclosure requirements to the Bank for the use of the two transitional measures over 16 years (art. 308 quater and 308 quinquies) In its assessment of the compliance and eligibility of the use of the two specific transitional measures, the Bank will take into account the highly prospective nature of the transitional period [16 years] and a set of elements.

The following specific information disclosure requirements to the Bank therefore apply to undertakings intending to submit an approval application relating to the measures referred to in Articles 308 quater and 308 quinquies of Directive 2009/138/EC. The complete file must include at least the following elements:

1. Documentation relating to calculations
   Documentation of all relevant calculations, including validation reports by the actuarial function.

2. Standardized reporting template
   The standardized reporting template summarizing the impact of the transitional measure on technical provisions under Solvency II, on the SCR, on own funds, as well as other relevant baseline data (e.g. TPI, TPI flashing, SCRSII without the measure, required solvency margin under Solvency I, share of the portfolio using the measure, …). This template must also be validated by the actuarial function (see Annex 2, Annex 2 LTG reporting template.xls).

3. ORSA (art. 45 §2 bis)
   In the context of the internal assessment of risks and solvency (ORSA), undertakings are required, pursuant to Article 45 §2 bis of Directive 2009/138/EC, to assess compliance with capital requirements, on the one hand, taking into account and on the other hand, without taking into account the transitional measures relating to Articles 308 quater and 308 quinquies. This assessment must take into account sufficiently realistic and prudent assumptions and different economic circumstances, in order to demonstrate that the undertaking is, based on credible projections of market conditions and its risk tolerance limits, able to satisfy, throughout

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Circular – P. 8/13 NBB_2015_30 – 9 December 2015

long the transitional period, according to the modalities of the transitional deduction. The prospective element of the measure (impact on TP, SCR and OF) must be in line with the prospective elements and the risk appetite of the ORSA.

4. Capital Management Plan
   Undertakings provide, based on their Capital Management Plan, all information concerning the objective, policies and procedures applied for the management of their own funds, including information on the dividend policy and distribution of profit shares. Undertakings must take into account the effect of the 16-year transitional measure and any other measure or approval element in their Capital Management Plan.

5. Stressed Capital Plan
   Undertakings provide, based on their Stressed Capital Plan, information regarding the expected evolution of their own funds over the planning period of their activity, taking into account their strategy, appropriately tested capital plans, and their intentions regarding the repayment or repurchase of any own fund element or regarding their projects to raise additional own funds. Undertakings must take into account the effect of the 16-year transitional measure and any other measure or approval element in their Stressed Capital Plan.

6. Stress Scenarios
   Considering the possibility that unfavorable scenarios may occur during the transitional period, the Bank wishes to evaluate the solvency situation and/or, where applicable, the realism of the phasing-in plan based on a number of scenarios (standardized stress scenarios). These 3 scenarios should cover different interest rate curve situations, different VA levels, and different stress situations for market risk. It is proposed to impose two instantaneous scenarios with projections over 16 years (see Annex 3, Annex 3 Stress Test template.xls):

The base scenario is designed as a non-stressed projection over 16 years. It includes the Solvency II balance sheet at t=0 and a projection of the balance sheet from t=1 to t=16 years based on the EIOPA curve, with a default UFR set at 4.2% and the applicable VA level (currently the VA is calibrated at 23 bps as of 31/08/2015 for the Euro). For the balance sheet projections, the EIOPA curve remains constant and materializes throughout the projections. The base balance sheets include the effect of the transitional measure, the impact of any other measure used by the undertaking for which prior approval is not required (VA, equity transitional,..., see Annex 1) and, where applicable, any other measure for which the undertaking has obtained prior approval from the Bank (Internal Model, USP, Ancillary Own Funds, ..., see Annex 1).

The simplified assumptions for the base scenario are as follows:
x Portfolio evolution assumptions are realistic. x Future Management Actions used for t=0 remain unchanged from t=1 to t=16. x Elements with significant and predictable impacts must be taken into account. x A re-calculation of the SCR is optional for t=1 to t=16 years, except in case of significant and predictable impact.

NBB_2015_30 – 9 December 2015 Circular – P. 9/13

Scenario 1 is designed as a long-term low interest rate simulation. It includes an EIOPA curve but with an extrapolation without UFR and with the applicable VA level (extrapolation using the Nelson-Siegel method). For the balance sheet projections, the curve used remains constant and materializes throughout the projections. The stressed balance sheet and the projected balance sheets from t=1 to t=16 years include the effect of the transitional measure, the impact of any other measure used by the undertaking for which prior approval is not required (VA, equity transitional,..., see Annex 1) and, where applicable, any other measure for which the undertaking has obtained prior approval from the Bank (Internal Model, USP, Ancillary Own Funds, ..., see Annex 1).

The simplified assumptions for Scenario 1 are as follows:
x Portfolio evolution assumptions are realistic. x Future Management Actions used for t=0 remain unchanged from t=1 to t=16. x Elements with predictable and significant impacts must be taken into account. x A re-calculation of the SCR is optional for t=1 to t=16 years, except in case of predictable and significant impact.

Scenario 2 is designed as a non-stressed interest rate simulation combined with stress at t=0 on financial instruments (bonds, equities, properties), knowing that this stress scenario can occur at any time in the future. The scenario includes an upward stress on spreads (corporate and sovereign) with partial compensation via an increase in the VA level (stressed VA of 99 bps) coupled with a downward stress on equities (-41%), a downward stress on residential property (-17%) and on commercial property (-41%). The stress factors on assets are identical to the latest calibrations produced by EIOPA for the Insurance Stress Test 2014. The stressed balance sheet includes the effect of the transitional measure (without the transitional deduction amount being recalculated based on the stress scenario), the impact of any other measure used by the undertaking for which prior approval is not required (VA, equity transitional,..., see Annex 1) and, where applicable, any other measure for which the undertaking has obtained prior approval from the Bank (Internal Model, USP, Ancillary Own Funds, ..., see Annex 1).

Undertakings can apply for approval to use transitional measures at any time; it is ideal to evaluate the file based on the latest available quarterly figures. The different interest rate curves to be used for Scenario 1 and Scenario 2 will be generated by the Bank's services and will be available upon request.

It should be recalled that the results of these stress scenarios are indicative and form an element of file evaluation, without necessarily leading to a conclusion.

7. Phasing-in plan (art. 308 sexies)
   In the event that additional information or the ORSA shows that, without the transitional measures set out in Articles 308 quater and 308 quinquies of Directive 2009/138/EC, the Solvency Capital Requirement would not be met (SCR<100%), the undertaking is required to present to the Bank a realistic phasing-in plan outlining the measures planned to establish, at the end of the transitional period, the level of eligible own funds corresponding to the Solvency Capital Requirement or to reduce its risk profile to ensure compliance of the Solvency Capital Requirement.

Circular – P. 10/13 NBB_2015_30 – 9 December 2015

This phasing-in plan takes into account annual projections of the solvency situation (the value of technical provisions and assets, the SCR according to the standard formula or according to an internal model1 and available own funds covering the SCR), and this for the entire transitional period and taking into account sufficiently realistic economic circumstances and other assumptions based on verifiable indicators and parameters. Regarding the projections for the realistic phasing-in plan, the Bank expects undertakings to provide the following elements:
x confirmation of the internal validation of all assumptions used in the phasing-in plan; x sensitivity analysis regarding the main assumptions of the phasing-in plan; x justification of the relevance and market conformity of the economic indicators and market values used, as well as the conservative nature of any simplifications used; x demonstration that the Solvency Capital Requirement can be covered with sufficient margin in different economic circumstances and adequate conservatism regarding the consideration of future results; x demonstration that the Solvency Capital Requirement level converges during the transitional period to a level consistent with the risk appetite stated in the ORSA, where applicable, providing justification for any divergences; x demonstration that the profitability parameters used have been subjected to critical analysis. To this end, a simple extrapolation based on the past will not be sufficient; x consideration of the impact of other transitional measures (such as the transitional measure on own fund elements [art. 308 ter §§ 9 and 10] and the transitional measure of the "equity risk" sub-module [art. 308 ter §13]) in the phasing-in plan; x in the case where the volatility correction is used, the integration into the phasing-in plan of the sensitivity analysis to the assumptions underlying the calculation of the volatility correction, the potential effect of a forced sale of assets on eligible own funds, and finally, the consequences of a reduction of the volatility correction to zero.

It is expected that the projections are sufficiently detailed to allow verification of the main assumptions.
The Bank reserves the right to request additional information and calculations if it considers the assumptions used to be insufficiently conservative or if the information provided proves unsatisfactory regarding the impact of the assumptions used on the results.

VI. Information Disclosure Requirements to the Bank in the Context of Approval Procedures for the Consideration of Ancillary Own Funds Elements (art. 90 Ancillary Own Funds)
In its assessment of the conformity and admissibility of the consideration of ancillary own funds elements, the Bank will take into account all elements comprising the application file as specified in Commission Implementing Regulation (EU) 2015/499 of 24 March 2015 (available on the following website: http://eur-lex.europa.eu/legalcontent/FR/TXT/PDF/?uri=OJ:JOL_2015_079_R_0004&from=FR) and the EIOPA Guidelines of 2 February 2015 concerning the consideration of ancillary own funds elements (available on the EIOPA website at the following address: https://eiopa.europa.eu/Pages/Guidelines/Guidelineson-ancillary-own-funds.aspx).

VII. Information Disclosure Requirements to the Bank in the Context of Approval Procedures for the Consideration of Own Funds Items Not on the List (art. 95 Own Funds items not on the list of items referred to in Art. 97)
In its assessment of the classification of own funds items not on the list of own funds items, the Bank will take into account all elements contained in the EIOPA Guidelines of 2 February 2015 on the classification of own funds (available on the EIOPA website at the following address: https://eiopa.europa.eu/Pages/Guidelines/Guidelines-onClassification-of-Own-Funds.aspx).

VIII. Information Disclosure Requirements to the Bank in the Context of Approval Procedures for the Replacement of a Subset of Parameters in the Standard Formula Design with Undertaking-Specific Parameters (art. 104 §7 Undertaking Specific Parameters)
In its assessment of the conformity and admissibility of the use of undertaking-specific parameters to replace a subset of parameters in the standard formula design, the Bank will take into account all elements comprising the application file as specified in Commission Implementing Regulation (EU) 2015/498 of 24 March 2015 (available on the following website: http://eur-lex.europa.eu/legalcontent/FR/TXT/PDF/?uri=OJ:JOL_2015_079_R_0003&from=FR) and the EIOPA Guidelines of 2 February 2015 on undertaking-specific parameters (available on the EIOPA website at the following address: https://eiopa.europa.eu/Pages/Guidelines/Guidelines-on-undertaking-specificparameters.aspx).

IX. Information Disclosure Requirements to the Bank in the Context of Approval Procedures for the Establishment of Special Purpose Vehicles on the Territory (art. 211 Special Purpose Vehicles)
In its assessment of the conformity and admissibility of the establishment of special purpose vehicles on the territory, the Bank will take into account all elements comprising the application file as specified in Commission Implementing Regulation (EU) 2015/462 of 19 March 2015 (available on the following website: http://eur-lex.europa.eu/legalcontent/FR/TXT/PDF/?uri=OJ:JOL_2015_076_R_0006&from=EN).

X. Information Disclosure Requirements to the Bank in the Context of Approval Procedures for the Use of the "Equity Risk" Sub-Module Based on Duration (art. 304 Duration-based equity sub-module)
In its assessment of the conformity and admissibility of the "equity risk" sub-module based on duration within the standard formula, the Bank will take into account all elements

Circular – P. 12/13 NBB_2015_30 – 9 December 2015

comprising the application file as specified in Article 304 of Directive 2009/138/EC and Article 170 of Commission Delegated Regulation (EU) 2015/35.

XI. Transitional Measure Requirements for the "Equity Risk" Sub-Module (art. 308 ter Equity transitional)
The transitional measure of the "equity risk" sub-module of Article 308 ter §13 must be applied optionally and without prior approval. The measure is applicable to the equity portfolio acquired prior to 2 January 2016 and for which the use of the "equity risk" sub-module based on duration (art. 304 of Directive 2009/138/EC) is not applicable or for which no approval has been granted. The equity portfolio to which this transitional measure applies must therefore be identifiable, verifiable, and subject to separate reporting.

Regarding the application of the transitional measure of the "equity risk" sub-module under Article 308 ter §13, reference is made to the regulatory and implementing technical standards of 27 November 2014 (available in the form of a consultation document on the EIOPA website at the following address: https://eiopa.europa.eu/Publications/Consultations/EIOPA_EIOPA-CP-14-061_ITS_Equity_charge.pdf) prescribing the procedures to be followed for the identification and documentation of the relevant equity portfolio.

It should be specified that for the application of this transitional measure, the standard parameter to be used for the calculation of the "equity risk" sub-module according to the standard formula without the option provided in art. 304 must include the symmetric adjustment of the capital requirement for equities as defined in art. 172 of Delegated Regulation 2015/35 of the Commission. Thus, the at least linear transition of 22% for the year starting 1 January 2016 to the standard parameter as of 1 January 2023 must be adapted according to the evolution of the symmetric adjustment of the capital requirement for equities.

XII. Information Disclosure Requirements to the Bank in the Context of Approval Procedures for the Use of a Full or Partial Internal Model (art. 112-113 Full and Partial Internal Models, art. 230-231 Group Internal Model)
In its assessment of the conformity and admissibility of the use of a full or partial internal model, the Bank will take into account all elements comprising the application file as specified in Articles 343-350 of Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 and Commission Implementing Regulations (EU) 2015/460 and 2015/461 of 19 March 2015 (available on the following websites: http://eur-lex.europa.eu/legalcontent/FR/TXT/PDF/?uri=OJ:JOL_2015_076_R_0004&from=EN and http://eur-lex.europa.eu/legalcontent/FR/TXT/PDF/?uri=OJ:JOL_2015_076_R_0005&from=EN), and according to the format specified in communication NBB_2015_05 of 2 February 2015 (http://www.nbb.be/doc/cp/fr/2015/20150202_NBB_2015_05.pdf).

Notwithstanding points II to XII included, the Bank reserves the right, in the context of the application of Solvency II, to request this additional information earlier if it deems necessary or to request additional information elements given the undertaking's solvency situation.

XIII. Bank Evaluation Procedure and Approval Timelines
For the different notification and approval procedures, the information elements required by the Bank must be sent to the Bank's case manager.

NBB_2015_30 – 9 December 2015 Circular – P. 13/13

For the approval procedures included in this circular, the Bank acknowledges receipt of the undertaking's approval request. The Bank intends to confirm whether the request is complete within 30 days from its date of receipt. An approval request will be considered complete if it includes all information required by the Bank. When the Bank establishes that the request is not complete, it immediately informs the undertaking that the approval timeline has not started to run and specifies why the request is not considered complete. The confirmation given by the Bank that a request is complete does not prevent it from requesting the additional information it needs to perform its assessment. This request will be motivated and specifies which additional information elements are required. During the assessment of the request, the Bank may ask the undertaking to make adjustments or modifications. The Bank ensures that a decision on the request is taken within a period of 6 months following the receipt of the complete request. The days elapsed between the date on which the Bank requests this information or adjustments and the date on which they are communicated to it do not count towards the 6-month period provided. This provision does not apply to approval procedures for the use of a full or partial internal model.

XIV. Entry into Force
This circular applies the day following its publication and replaces Circular NBB_2015_15: Additional Information Disclosure Requirements to the Bank in the Context of the Solvency II Preparatory Period as well as Communication NBB_2015_13 / Solvency II – The Use of the Relevant Risk-Free Interest Rate Curve Published by EIOPA.
A copy of this circular is sent to the commissioner(s), approved auditor(s) of your establishment.
We ask you to accept, Madam, Sir, the expression of our distinguished sentiments.
Jan Smets
Governor

Annexes: 3