Regulatory Alerts2019-12-05 | NBB_2019_31Added · Updated
NBB Circular NBB_2019_31: EBA Guidelines on the application of the definition of default under Article 178 of Regulation (EU) No 575/2013
The National Bank of Belgium integrates the European Banking Authority's guidelines on the definition of default into its supervisory practice, requiring credit institutions and securities firms to align their internal procedures and IT systems with the new definition by January 1, 2021. Institutions using the Internal Ratings-Based approach must adapt their rating systems to reflect the new definition, including adjusting historical data and applying additional prudential margins, with specific deadlines of January 1, 2022, for continuing models and January 1, 2024, for disappearing models. These changes necessitate internal validation and, if significant, prior approval from the regulator, while also mandating the extension or deferral of historical data periods to ensure consistent risk quantification.