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Commission Delegated Regulation (EU) 2022/439

Preamble
Recitals 38
Chapter 1 - GENERAL PROVISIONS ON THE ASSESSMENT METHODOLOGY (Article 1-5) 5
Chapter 2 - ASSESSMENT METHODOLOGY FOR SEQUENTIAL IMPLEMENTATION PLANS AND PERMANENT PARTIAL USE OF THE STANDARDISED APPROACH (Article 6-8) 3
Chapter 3 - ASSESSMENT METHODOLOGY FOR THE FUNCTION OF VALIDATION OF INTERNAL ESTIMATES AND OF THE INTERNAL GOVERNANCE AND OVERSIGHT OF AN INSTITUTION (Article 9-17) 9
Chapter 4 - ASSESSMENT METHODOLOGY FOR USE TEST AND EXPERIENCE TEST (Article 18-22) 5
Chapter 5 - ASSESSMENT METHODOLOGY FOR ASSIGNMENT OF EXPOSURES TO GRADES OR POOLS (Article 23-25) 3
Chapter 6 - ASSESSMENT METHODOLOGY FOR IDENTIFICATION OF DEFAULTS (Article 26-29) 4
Chapter 7 - ASSESSMENT METHODOLOGY FOR RATING SYSTEMS DESIGN, OPERATIONAL DETAILS AND DOCUMENTATION (Article 30-40) 11
Chapter 8 - ASSESSMENT METHODOLOGY FOR RISK QUANTIFICATION (Article 41-58) 18
Chapter 9 - ASSESSMENT METHODOLOGY FOR ASSIGNMENT OF EXPOSURES TO EXPOSURE CLASSES (Article 59-62) 4
Chapter 10 - ASSESSMENT METHODOLOGY FOR STRESS TEST USED IN ASSESSMENT OF CAPITAL ADEQUACY (Article 63-66) 4
Chapter 11 - ASSESSMENT METHODOLOGY FOR THE CALCULATION OF OWN FUNDS REQUIREMENTS (Article 67-71) 5
Chapter 12 - ASSESSMENT METHODOLOGY FOR DATA MAINTENANCE (Article 72-75) 4
Chapter 13 - ASSESSMENT METHODOLOGY OF INTERNAL MODELS FOR EQUITY EXPOSURES (Article 76-82) 7
Chapter 14 - ASSESSMENT METHODOLOGY FOR MANAGEMENT OF CHANGES TO RATING SYSTEMS (Article 83-84) 2
Chapter 15 - FINAL PROVISION (Article 85) 1

Article 26 - General

Article 26

General

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1. In order to assess whether the institution identifies all situations which are to be considered defaults in accordance with Article 178(1) to (5) of Regulation (EU) No 575/2013 and Commission Delegated Regulation (EU) 2018/171 ⁵ competent authorities shall verify all of the following:

((a))

the detailed specification and practical application of the triggers for identifying the default of an obligor, in accordance with Article 27;

((b))

the robustness and effectiveness of the process used by an institution for identifying the default of an obligor, in accordance with Article 28;

((c))

the triggers and process used by an institution for the reclassification of a defaulted obligor to non-default status, in accordance with Article 29.

2. For the purposes of the verification under paragraph 1 competent authorities shall apply all of the following methods:

((a))

review the institution’s internal criteria, policies and procedures for establishing whether a default has occurred (‘definition of default’) and for the treatment of defaulted exposures;

((b))

review the roles and responsibilities of the units and management bodies involved in the identification of the default of an obligor and the management of defaulted exposures;

((c))

review the relevant minutes of the institution’s internal bodies, including the management body, or committees;

((d))

review the relevant findings of the internal audit or of other control functions of the institution;

((e))

review the progress reports on the efforts made by the institution to correct shortcomings and mitigate risks detected during relevant audits;

((f))

obtain written statements from or interview the relevant staff and senior management of the institution;

((g))

review the criteria used by the personnel responsible for manual assignment of the default status to an obligor or an exposure and of the return to the non-default status.

3. For the purposes of the verification under paragraph 1, competent authorities may also apply any of the following additional methods:

((a))

review the functional documentation of the IT systems used in the process of identification of the default of an obligor;

((b))

conduct sample testing and review documents relating to the characteristics of an obligor and to the origination and maintenance of the exposures;

((c))

perform their own tests on the data of the institution or require the institution to perform specific tests;

((d))

review other relevant documents of the institution.

5 Commission Delegated Regulation (EU) 2018/171 of 19 October 2017 on supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to regulatory technical standards for the materiality threshold for credit obligations past due ( OJ L 32, 6.2.2018, p. 1 ). ↩

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