Communications - Communication of 29 May 2020 - SIM and SIM Groups

1
Communication of 29 May 2020
SIM and SIM groups: amendments to the regulations on interest rate risk arising from non-trading activities and entity stress tests.
Preamble
This Communication amends the regulations contained in the Communication of 31.3.2014 (1) concerning the application to SIMs and SIM groups of the CRDIV/CRR rules (2), to align them with the evolution of the European regulatory framework on entity interest rate risk management and stress testing (3). The amendments aim to transpose the European Banking Authority (EBA) Guidelines on:
i. the management of interest rate risk arising from non-trading book activities, which contain guidelines addressed to banks and SIMs regarding supervisory expectations on the systems that entities are required to implement to identify, measure, and manage the interest rate risk of the "banking book";
ii. entity stress tests, which contain guidelines addressed to banks and SIMs on organizational requirements, methodologies, and common processes for the execution of internal stress tests.
The discretions decided to be exercised with respect to European regulation have been subject to public consultation. The most relevant points were:
i. the amendments made to the simplified methods for measuring exposure to interest rate risk in the banking book;
ii. the application of the proportionality principle;
iii. the explicit attribution to the Risk Management function of tasks related to the assessment of the robustness and effectiveness of the stress test program.
On the Bank of Italy website, the report of the consultation and the observations received for which confidentiality was not requested are published.

1
See Communication of 31.3.2014 published in the Supervisory Bulletin 3/2014 and subsequently integrated with Communications of 4 January 2018 and 29 July 2019.
2
Directive 2013/36/EU (CRDIV) and Regulation 575/2013/EU (CRR).
3
The regulations for banks were subject to an analogous regulatory intervention. See the 32nd update of Circular no. 285 "Supervisory provisions for banks", with which the chapters on "Prudential control process" (Part One, Title III, Chapter 1), "The system of internal controls" (Part One, Title IV, Chapter 3) and "Governance and management of liquidity risk" (Part One, Title IV, Chapter 6) were modified.

2
No further impact analyses were carried out beyond those already evaluated at the EBA.
2. Amendments to the regulations
To align the regulations on interest rate risk and stress tests with the EBA Guidelines, SIMs and SIM groups apply:
i. the Guidelines on the management of interest rate risk arising from non-trading book activities (EBA/GL/2018/02) as transposed in Circular no. 285;
ii. the Guidelines on entity stress tests (EBA/GL/2018/04) as transposed in Circular no. 285.
3. Entry into force
This regulatory amendment enters into force on the day following its publication in the Official Gazette. In line with what has already been provided for banks, SIMs and SIM groups must, within 60 days of publication, align at least their risk management systems, and then complete full alignment with the new Guidelines in the 2021 ICAAP report.

This communication was issued following the opinion of CONSOB, pursuant to Article 6, paragraph 1, of the TUF.