Banks Act, 1990 (Act No. 94 of 1990)RegulationsRegulations relating to BanksChapter II : Financial, Risk-based and other related Returns and Instructions, Directives and Interpretations relating to the completion thereof23. Credit risk: monthly returnDirectives and interpretations for completion of monthly return concerning credit risk (Form BA 200)Subregulation (19) Calculation of counterparty credit exposure in terms of the internal model methodSubregulation (19)(f) Matters relating to model validation and operational requirements |
| (f) | Matters relating to model validation and operational requirements |
A bank that wishes to adopt the internal model method for the measurement of the bank's exposure to counterparty credit risk by estimating expected positive exposure, that is, a bank that wishes to apply its EPE model, shall in addition to such requirements as may be specified in writing by the Registrar comply with—
| (i) | the qualitative requirements specified in regulation 39(8), which qualitative requirements include matters relating to— |
| (A) | the bank's EPE model; |
| (B) | board and senior management oversight and involvement; |
| (C) | an independent risk control function or unit; and |
| (D) | backtesting. |
| (ii) | the operational requirements specified in regulations 39(9) to 39(12), which operational requirements include matters relating to— |
| (A) | the use test; |
| (B) | stress testing; |
| (C) | the identification of wrong-way risk; and |
| (D) | internal controls and model integrity. |