CA-14.9 CA-14.9 Letter of Model Recognition
CA-14.9.1
As stated in Section CA-14.1,
conventional bank licensees which propose to use internal models for the calculation of theirmarket risk capital requirements must submit their detailed proposals, in writing, to the CBB. The CBB will review these proposals, and upon ensuring that theconventional bank licensee'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 theconventional bank licensees .January 2015CA-14.9.2
The letter of model recognition is 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 preprocessing models, the
conventional bank licensee will also be told how the output of recognised models must feed into the processing of other interest rate, equity, foreign exchange andcommodities risk. The conditions of model recognition may include additional reporting requirements. The CBB's prior written approval must be obtained for any modifications proposed to be made to the models previously recognised by the CBB. In cases where aconventional bank licensee proposes to apply the model to new but similar products, it must obtain the CBB's prior approval. In some cases, the CBB 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 theconventional bank licensee .January 2015CA-14.9.3
The CBB may withdraw its approval granted for any
conventional bank licensee's model if it believes that the conditions based on which the approval was granted are no longer valid or have changed significantly.January 2015
