CEBS second consultation on validation and assessment of credit and operational risk approaches

20 January 2006

The Committee of European Banking Supervisors (CEBS) started a second consultation on some aspects of the validation and assessment of the risk management and risk measurement systems used by credit institutions and investment firms to calculate their capital requirements. Responses on the first consultation criticised the proposed guidelines as being too detailed and prescriptive. Therefore, CEBS introduced a good faith clause in the revised paper to provide some flexibility to institutions that developed their models before final supervisory guidance was issued. The Committee also streamlined the internal governance parts of the guidelines and changed several provisions in the paper to be read as illustrative examples instead of formal guidance.

The consultation document also includes new guidance on the assignment of exposures to the equity exposure class, on the securitisation exposure class, and on purchased receivables; guidance on the estimation of loss given default under economic downturn conditions (downturn LGDs); and guidance on quantitative aspects of Advanced Measurement Approach (AMA). The industry is invited to comment on the parts of the guidelines covering these new issues.

Deadline for consultation is 16 February 2006.

Press release
Revised paper
Feetback document

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