The FSC Announces Application Documents and Review Procedures of Banks' Application for Adoption of the Internal Ratings-Based Approach for Credit Risk Capital Calculation
2024-01-25
To strengthen the risk management framework of domestic banks, the Financial Supervisory Commission (FSC) amended the " Methods for Calculating Bank’s Regulatory Capital and Risk-Weighted Assets" (hereinafter referred to as the Methods) on December 7, 2023, in accordance with "Basel Capital Accord III (Basel III): Finalising post-crisis reforms" published by the Basel Committee on Banking Supervision (BCBS). These new rules will become effective on January 1, 2025. To enhance banks’ internal risk management capabilities, the FSC accepts banks to apply for the adoption of the internal ratings-based (IRB) approach for credit risk to calculate capital requirements.
To help banks prepare their applications for the adoption of the IRB approach, the FSC has outlined the application documents and relevant review matters as follows:
1. Application period: Applications will be accepted in batches, and the deadline for the first batch is June 30, 2024 (the postmark date will be used as proof for mailed submissions).
2. Application documents: When a bank applies to the FSC for the adoption of the IRB approach, the bank must provide the relevant documents based on the review stage, including the application form, meeting minutes of the board of directors’ resolution to adopt the IRB approach, documents or information proving the eligibility, implementation plan, self-assessment checklist, declarations, summary description of the rating system, trial calculation results, and other relevant documents. The formats of these application documents are provided in Attachments 1 to 7.
3. Review process and key points: (refer to Attachment 8)
(1) The FSC will conduct reviews in multiple phases including the preliminary review, secondary review, on-site review, and pilot implementation (one year in principle). The review process (including the pilot implementation) is expected to be completed within 1 year and 10 months, and the FSC will notify the applicant of a written review decision.
(2) The applicant bank must meet the criteria for the minimum assets size of NT$2.5 trillion, financial soundness, and proper compliance. Also, the bank must meet the minimum operational requirements specified in the Methods. The FSC's review will focus on the accuracy of the data system, the rationality of the risk model, and the appropriateness and execution performance of the corporate governance and supervisory mechanisms.
The FSC stated that allowing banks to apply for adopting the IRB approach aims to enhance banks' internal risk management capacity, enabling more precise measurement and control of credit risks and credit assets for accurate capital calculation. Banks meeting the criteria for asset size, financial soundness, and proper compliance may submit their applications with the required documents to the FSC by the end of June 2024.
Contact unit: Legal Affairs Division, Banking Bureau
Telephone: (02)8968-9650
If you have any questions, please send an email to the FSC's public opinion mailbox
To help banks prepare their applications for the adoption of the IRB approach, the FSC has outlined the application documents and relevant review matters as follows:
1. Application period: Applications will be accepted in batches, and the deadline for the first batch is June 30, 2024 (the postmark date will be used as proof for mailed submissions).
2. Application documents: When a bank applies to the FSC for the adoption of the IRB approach, the bank must provide the relevant documents based on the review stage, including the application form, meeting minutes of the board of directors’ resolution to adopt the IRB approach, documents or information proving the eligibility, implementation plan, self-assessment checklist, declarations, summary description of the rating system, trial calculation results, and other relevant documents. The formats of these application documents are provided in Attachments 1 to 7.
3. Review process and key points: (refer to Attachment 8)
(1) The FSC will conduct reviews in multiple phases including the preliminary review, secondary review, on-site review, and pilot implementation (one year in principle). The review process (including the pilot implementation) is expected to be completed within 1 year and 10 months, and the FSC will notify the applicant of a written review decision.
(2) The applicant bank must meet the criteria for the minimum assets size of NT$2.5 trillion, financial soundness, and proper compliance. Also, the bank must meet the minimum operational requirements specified in the Methods. The FSC's review will focus on the accuracy of the data system, the rationality of the risk model, and the appropriateness and execution performance of the corporate governance and supervisory mechanisms.
The FSC stated that allowing banks to apply for adopting the IRB approach aims to enhance banks' internal risk management capacity, enabling more precise measurement and control of credit risks and credit assets for accurate capital calculation. Banks meeting the criteria for asset size, financial soundness, and proper compliance may submit their applications with the required documents to the FSC by the end of June 2024.
Contact unit: Legal Affairs Division, Banking Bureau
Telephone: (02)8968-9650
If you have any questions, please send an email to the FSC's public opinion mailbox
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Update：
2025-01-07