CA-14.2.1
Past version: Effective from 01 Apr 2008 to 31 Mar 2011
To view other versions open the versions tab on the right
The CBB will give its approval for the use of internal models to measure market risks only if, in addition to the detailed requirements described later in this chapter, it is satisfied that the following general criteria are met:
(a) that the bank's risk management system is conceptually sound and is implemented with integrity;
(b) that the bank has, in the CBB's view, sufficient numbers of staff skilled in the use of sophisticated models not only in the trading area but also in the risk control, audit and the back office areas;
(c) that the bank's models have, in the CBB's judgement, a proven track record of reasonable accuracy in measuring risk. The CBB recognises that the use of internal models is, for most banks in Bahrain, a relatively new development and, therefore, it is difficult to establish a track record of reasonable accuracy. The CBB, therefore, will require a period of initial monitoring and live testing of a bank's internal model before it is used for supervisory capital purposes; and
(d) that the bank regularly conducts stress tests as outlined in section CA-14.7 and conducts back-testing as described in section CA-14.6.
Apr 08