| (a) |
A bank that wishes to adopt the internal models approach for the measurement of the bank's exposure to market risk arising, inter alia, from positions held in the bank's trading book— |
| (i) |
shall obtain the prior written approval of the Registrar; |
| (ii) |
shall at all times comply with the relevant conditions and requirements specified in this subregulation (8); |
| (iii) |
shall at all times comply with such additional conditions or requirements as may be specified in writing by the Registrar, |
Provided that the Registrar—
| (A) |
may specify a period of initial monitoring and testing of the bank's internal models before the models are used by the bank to calculate the bank's relevant required amount of capital and reserve funds; |
| (B) |
shall not grant approval for a bank to apply the internal models approach for the measurement of the bank's exposure to market risk unless— |
| (i) |
the Registrar is satisfied that the bank's risk management system is conceptually sound and implemented with integrity; |
| (ii) |
the bank has demonstrated to the satisfaction of the Registrar that the bank has a sufficient number of sufficiently skilled staff— |
| (aa) |
in the use of sophisticated models in the bank's trading area; |
| (dd) |
in all relevant back-office areas; |
| (iii) |
the bank has demonstrated to the satisfaction of the Registrar that its models have a proven track record of reasonable accuracy in the measurement of the bank's relevant risk exposures; |
| (iv) |
the bank has demonstrated to the satisfaction of the Registrar that the bank regularly conducts relevant stress tests in accordance with the relevant requirements specified in paragraph (f) below. |
Medicines and Related Substances Act, 1965
