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    CSSF Amends Circulars on ICAAP, ILAAP, and Stress Testing Program

    October 23, 2020

    CSSF published the circular CSSF 20/753, which amends CSSF 07/301 on the implementation of the Internal Capital and Liquidity Adequacy Assessment Process (ICAAP and ILAAP) and CSSF 11/506 on the principles of a sound stress testing program. CSSF has issued these amendments to provide institutions under the Capital Requirements Regulation (CRR) with updated supervisory expectations on the regulatory requirements applicable to the ICAAP/ILAAP and to stress testing programs pursuant to the EBA guideline (EBA/GL/2018/04). The application date for the circular is October 31, 2020. CSSF expects these changes to be reflected within the governance and operating frameworks of institutions from December 31, 2020.

    The amended Circulars CSSF 07/301 and CSSF 11/506 shall no longer be applicable to non-CRR investment firms. The circular CSSF 07/301 has been considerably shortened and is now focusing on the key implementing provisions that institutions shall meet to comply with Articles 18 and 19 of the CSSF Regulation N° 15-02. These provisions complement the general (risk) governance principles of Circular CSSF 12/552, which apply to ICAAP and ILAAP in particular. Also, the reporting requirements have been clarified in line with the EBA guidelines on ICAAP and ILAAP information collected for SREP purposes (EBA/GL/2016/10). The amendments of circular CSSF 11/506 are meant to provide further guidance on the principle of proportionality and on operational arrangements related to the coverage of longer term risks (such as climate-related risks) and data infrastructure. To allow for a straightforward review of the changes made, the amendments to Circular CSSF 11/506 are presented in tracked changes in Annex 1. A dedicated version in tracked changes of Circular CSSF 07/301 has not been provided due to the substantial shortening and redesign of the circular. The amended text, without tracked changes, appears in Annex 2. 


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    Effective Date: October 31, 2020

    Keywords: Europe, Luxembourg, Banking, ICAAP, ILAAP, Stress Testing, Regulatory Capital, CRR, Basel, Climate Change Risk, Proportionality, Governance, EBA, CSSF

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