CSSF Amends Circulars on ICAAP, ILAAP, and Stress Testing Program
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.
Related Links
Effective Date: October 31, 2020
Keywords: Europe, Luxembourg, Banking, ICAAP, ILAAP, Stress Testing, Regulatory Capital, CRR, Basel, Climate Change Risk, Proportionality, Governance, EBA, CSSF
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
James Partridge
Credit analytics expert helping clients understand, develop, and implement credit models for origination, monitoring, and regulatory reporting.
Previous Article
BoE Encourages Submission of Branch Returns on BEEDS PortalRelated Articles
CFPB Finalizes Rule on Small Business Lending Data Collection
The Consumer Financial Protection Bureau (CFPB) published a final rule that sets out data collection requirements on small business lending, under section 1071 of the Dodd-Frank Act.
BCBS to Consult on Pillar 3 Climate Risk Disclosures by End of 2023
The Bank for International Settlements (BIS) published a summary of the recent Basel Committee (BCBS) meetings.
FINMA Approves Merger of Credit Suisse and UBS
The Swiss Financial Market Supervisory Authority (FINMA) has approved the takeover of Credit Suisse by UBS.
BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks
The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.
US Congress Report Examines Data Privacy and Cybersecurity Regulations
The U.S. Congressional Research Service published a report on banking, data privacy, and cybersecurity regulation.
OSFI Finalizes on Climate Risk Guideline, Issues Other Updates
The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.
EU to Conduct One-Off Scenario Analysis to Assess Transition Risk
The European authorities recently made multiple announcements that impact the banking sector.
APRA Assesses Macro-Prudential Policy Settings, Issues Other Updates
The Australian Prudential Regulation Authority (APRA) published an information paper that assesses its macro-prudential policy settings aimed at promoting stability at a systemic level.
BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending
BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.
HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks
The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.
