Prudential expectations regarding the monitoring of the application of the own funds regulation for institutions using advanced approaches for credit risk (IRB) and/or operational risk (AMA)

rue du Congrès 12-14 | 1000 Bruxelles t +32 2 220 53 42| f +32 2 220 54 93 | www.cbfa.be Communication CBFA_2008_20 of 12 November 2008 Prudential expectations regarding the monitoring of the application of the own funds regulation for institutions having adopted an advanced approach for credit risk (IRB) and/or operational risk (AMA) Scope:
Institutions subject to the regulation of 17 October 2006 on the own funds of credit institutions and investment firms, subject to the consolidated supervision of the CBFA, and having obtained authorization to use advanced approaches for regulatory purposes for their credit risk and/or operational risk. Summary/Objectives:
Additional information on how the Commission bancaire, financière et des assurances (CBFA) intends to monitor the application of the regulation of 17 October 2006 on the own funds of credit institutions and investment firms regarding: monitoring of compliance with the conditions associated with the granting of authorization to use advanced approaches for regulatory purposes; continuous verification of compliance with the minimum requirements set by the regulation for the use of these approaches; monitoring of modifications made to approved models. Madam, Sir, Please find, attached to this communication, additional information on how the Commission bancaire, financière et des assurances (CBFA) intends to monitor the application of the regulation of 17 October 2006 on the own funds of credit institutions and investment firms. This additional information is addressed to institutions subject to the consolidated supervision of the CBFA and having obtained authorization to use advanced approaches for regulatory purposes for their credit risk and/or operational risk. In accordance with the principles established by Directive 2006/48/EC regarding cooperation between European supervisory authorities, institutions subject to the consolidated supervision of another Member State must refer to the rules and procedures established by the relevant supervisory authority. This additional information specifies certain expectations of the CBFA regarding:

1. Monitoring of compliance with the conditions associated with the granting of authorization to use advanced approaches for regulatory purposes, including monitoring of any sequential implementation plan for these approaches.
   This monitoring will be carried out according to the schedule established by the CBFA. Monitoring the sequential implementation of advanced approaches will fall within the framework of the procedures defined in the uniform letters PPB/154 and PPB/156 of 24 October 2005 and in circular PPB-2007-1-CPB of 8 February 2007.

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CBFA rue du Congrès 12-14 | 1000 Bruxelles t +32 2 220 53 42| f +32 2 220 54 93 | www.cbfa.be
2. Continuous verification of compliance with the minimum requirements set by the regulation for the use of advanced approaches.
The monitoring of the application of the own funds regulation will be carried out based on internal files established by the institutions. These files must be kept available to the CBFA when requested by the latter within the framework of its supervisory missions.
3. Monitoring of modifications made to approved models.
Significant modifications to the initially approved models must be notified to the CBFA and require prior authorization.
In case of doubt regarding the procedures to be followed in the context of monitoring the application of the own funds regulation, you may contact the relevant services of the CBFA.
A copy of this communication is sent to the auditor(s) of your institution.
Please accept, Madam, Sir, the expression of my distinguished sentiments.
The President,
Jean-Paul SERVAIS.
Appendix: - CBFA_2008_20-1 / Additional information concerning certain prudential expectations regarding the monitoring of the application of the own funds regulation for institutions having adopted an advanced approach for credit risk (IRB) and/or operational risk (AMA)