AU-3.4 AU-3.4 Review and Validation of Internal Models
AU-3.4.1
Conventional bank licensees seeking the CBB approval for their use of internal models for the calculation of regulatory capital requirements, must arrange for their external auditor 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 CBB.Amended: January 2011
October 2007AU-3.4.2
Before granting its approval for
Bahraini conventional banks to use internal models for the measurement of market risk in the context of regulatory capital calculations, the CBB requires such models to be validated by both the internal and external auditors of the bank (see Chapter CA-9). The CBB will review the validation procedures performed by the internal and external auditors, and may independently carry out further validation procedures.Amended: January 2011
October 2007AU-3.4.3
The specific requirements and procedures for external validation of models are contained in Section CA-9.8.
October 07AU-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 CBB has no other material supervisory concerns regarding the licensee concerned.
October 07
