CA-14.10.3
Notwithstanding the goal of moving to comprehensive internal models as set out in Paragraph CA-14.10.1 above, for banks which, for the time being, will be applying a combination of internal models and the standardised methodology, the following conditions will apply:
(a) Each broad risk factor category must be assessed by applying a single approach (either internal models or the standardised approach), i.e., no combination of the two methods will, in principle, be permitted within a risk factor category or across a bank's different entities for the same type of risk (see, however, the transitional provisions in Section CA-A.4)80;
(b) All of the criteria laid down in this chapter will apply to the models being used;
(c) Banks may not modify the combination of the two approaches which they are applying, without justifying to the CBB that they have a valid reason for doing so, and obtaining the CBB's prior written approval;
(d) No element of market risk may escape measurement, i.e. the exposure for all the various risk factors, whether calculated according to the standardised approach or internal models, would have to be captured; and
(e) The capital charges assessed under the standardised approach and under the models approach should be aggregated applying the simple sum method.
80 However, banks may incur risks in positions which are not captured by their models, for example, in minor currencies or in negligible business areas. Such risks should be measured according to the standard methodology.
Amended: January 2012
Amended: April 2011
Apr 08
Amended: April 2011
Apr 08