RegAlert2019-12-05 | 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.
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NBB_2019_31 – 5 December 2019 Circular – Page 1/3 14 Berlaimont Boulevard – BE-1000 Brussels tel. +32 2 221 30 17 company number: 0203.201.340 RPM Brussels www.bnb.be Circular Brussels, 5 December 2019 Reference: NBB_2019_31 your contact:
Sietse Bracke tel. +32 2 221 21 65
Sietse.Bracke@nbb.be
EBA Guidelines (EBA/GL/2016/07) on the application of the definition of default under Article 178 of Regulation (EU) No 575/2013 Scope Credit institutions, securities firms, resolution bodies and entities treated as resolution bodies under Belgian law, and branches established in Belgium of credit institutions and securities firms subject to the law of a non-EEA country, both on a consolidated and solo basis. Summary/Objective These guidelines clarify the requirements regarding the application of Article 178 of Regulation (EU) No 575/2013 (hereinafter the 'CRR') on the definition of default, in accordance with the mandate entrusted to the European Banking Authority (hereinafter 'the EBA') under Article 178(7) of that Regulation. These guidelines apply from 1 January 2021 to all exposures under the Standardised Approach for credit risk, and therefore institutions should integrate the requirements of these guidelines into their internal procedures and IT systems by that date. With regard to exposures under the Internal Ratings-Based (IRB) Approach for credit risk, a distinction is made between internal models that, under the finalised 'Basel III' package, continue to be modelled, and internal models that, under the finalised 'Basel III' package, disappear (namely LGD and CCF models for exposures to institutions and financial institutions treated as corporates). Regarding the first category of models, these guidelines apply from 1 January 2021; for the second category of models, they apply from 1 January 2024. By 1 January 2022 at the latest, internal models that continue to be modelled under the finalised 'Basel III' package must, where necessary, be modified following the new definition of default. For internal models that disappear under the finalised 'Basel III' package, modifications must be made by 1 January 2024 at the latest.
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Source: National Bank of Belgium — original document · Summary generated with machine assistance and reviewed before publication; the authoritative text is the regulator's original document. How RegAlert works
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