Status: Please note you should read all Brexit changes to the FCA Handbook and BTS alongside the main FCA transitional directions. Where these directions apply the 'standstill', firms have the choice between complying with the pre-IP completion day rules, or the post-IP completion day rules. To see a full list of Handbook modules affected, please see Annex B to the main FCA transitional directions.

CHAPTER 3 QUANTITATIVE STANDARDS

SECTION 1 Use of internal data, external data, scenario analysis and BEICF ( the four elements )

Article 20 General principles

Competent authorities shall assess an institution's compliance with the standards relating to the use of internal data, external data, scenario analysis and BEICF ("the four elements"), as referred to in Article 322 of Regulation (EU) No 575/2013, by verifying at least the following:

  1. (a)

    that the institution has internal documentation specifying in detail how the four elements are gathered, combined and/or weighted, including a description of the modelling process that illustrates the use and combination of the four elements and of the rationale for the modelling choices;

  2. (b)

    that the institution has a clear understanding of how each of the four elements influence the AMA own funds requirements;

  3. (c)

    that the combination of the four elements used by the institution is based on a sound statistical methodology, sufficient for estimating high percentiles;

  4. (d)

    that the institution applies at least the following when collecting, generating and treating the four elements:

    1. (i)

      the criteria set out in Articles 21 to 24 relating to internal data;

    2. (ii)

      the criteria set out in Article 25, relating to external data;

    3. (iii)

      the criteria set out in Article 26, relating to scenario analysis;

    4. (iv)

      the criteria set out in Article 27, relating to BEICF.