AI Summary of Article 325bi Qualitative requirements
This document outlines the essential qualitative requirements for internal risk-measurement models utilised in calculating capital requirements for market risk within financial institutions. Key stipulations include the integration of these models into daily risk management processes, independence of the risk control unit, and active engagement from senior management in the oversight of risk exposures.
Furthermore, institutions are mandated to uphold rigorous validation, stress testing, and independent reviews of their internal models, ensuring compliance with evolving best practices and regulatory expectations. Regular assessments of the overall risk management process are also required to maintain documentation adequacy and data accuracy.
Article 325bi Qualitative requirements
1. Any internal risk-measurement model used for the purposes of this Chapter shall be conceptually sound, shall be calculated and implemented with integrity, and shall comply with all the following qualitative requirements:
(a) any internal risk-measurement model used to calculate capital requirements for market risk shall be closely integrated into the daily risk management process of the institution and shall serve as the basis for reporting risk exposures to senior management;
(b)an institution shall have a risk control unit that is independent from business trading units and that reports directly to senior management; that unit shall:
(i) be responsible for designing and implementing any internal risk-measurement model used in the alternative internal model approach for the purposes of this Chapter;
(ii) be responsible for the overall risk management system;
(iii) produce and analyse daily reports on the output of any internal model used to calculate own funds requirements for market risk, and on the appropriateness of measures to be taken in terms of trading limits;