CA-9.9 CA-9.9 Letter of model recognition
CA-9.9.1
As stated in Section CA-9.1, banks which propose to use internal models for the calculation of their market risk capital requirements should submit their detailed proposals, in writing, to the Central Bank. The Central Bank will review these proposals, and upon ensuring that the bank's internal models meet all the criteria for recognition set out earlier in this Chapter, and after satisfying itself with the results of validation procedures carried out by the internal and external auditors and/or by itself, will issue a letter of model recognition to the bank.
October 07CA-9.9.2
The letter of model recognition should be specific. It will set out the products covered, the method for calculating capital requirements on the products and the conditions of model recognition. In the case of pre-processing models, the bank will also be told how the output of recognised models should feed into the processing of other interest rate, equity, foreign exchange and
commodities risk. The conditions of model recognition may include additional reporting requirements. The Central Bank's prior written approval should be obtained for any modifications proposed to be made to the models previously recognised by the Central Bank. In cases where a bank proposes to apply the model to new but similar products, there will be a requirement to obtain the Central Bank's prior approval. In some cases, the Central Bank may be able to give provisional approval for the model to be applied to a new class of products, in others it will be necessary to revisit the bank.October 07CA-9.9.3
The Central Bank may withdraw its approval granted for any bank's model if it believes that the conditions on which the approval was based are no longer valid or have changed significantly.
October 07
