AU-3.4 AU-3.4 Review and Validation of internal models
AU-3.4.1
Conventional bank licensees seeking BMA approval for their use of internal models for the calculation of regulatory capital requirements, must arrange for their external auditors to validate the soundness of the model concerned. This external review must be undertaken at least once a year, unless otherwise exempted in writing by the BMA.AU-3.4.2
Before granting its approval for
Bahraini conventional bank licensees to use internal models for the measurement of market risk in the context of regulatory capital calculations, the BMA requires such models to be validated by both the internal and external auditors of the bank (see Chapter CA-9). The Agency will review the validation procedures performed by the internal and external auditors, and may independently carry out further validation procedures.AU-3.4.3
The specific requirements and procedures for external validation of models are contained in Section CA-9.8.
AU-3.4.4
Exemptions from the external validation requirement are normally only given where a track record of satisfactory validations has been developed over several years, and where the BMA has no other material supervisory concerns regarding the licensee concerned.
