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CEBS published its guidelines on the implementation, validation and assessment of the risk management and risk measurement systems used by credit institutions and investment firms applying to move to an advanced approach to calculate their capital requirements. The guidelines reflect a common understanding of what supervisors should take into account when assessing an application from an institution to use the Internal Ratings Based (IRB) or Advanced Measurement (AMA) approaches for regulatory purposes. CEBS’ aim is to streamline the approval process, especially for cross-border groups, and to contribute to a level-playing field for institutions using the more advanced risk measurement approaches.
CEBS received 34 responses from industry associations and other market participants during two consultation periods. The responses generally supported CEBS' work towards convergence, while criticising the guidelines as being too detailed and prescriptive. Therefore, CEBS introduced some flexibility for institutions that had developed their models before final guidelines were issued. CEBS also streamlined the internal governance parts of the guidelines and changed several provisions in the paper to be read as examples illustrating underlying principles rather than formal guidance.
However, CEBS was not able fully to accommodate industry’s general request for less prescriptive and less detailed guidelines. Over time, as good practices emerge, it should be possible to move towards more principles based guidance.
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Guidelines
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