In this act Article 18 of 42
Article 18 — Qualitative requirements
Financial servicesLevel 2RTSEMIRIn forceOfficial source
18(1)Copy link
1.Counterparties shall establish an internal governance process to assess the appropriateness of the initial margin model on a continuous basis, including all of the following:
18(1)(a)
(a)an initial validation of the model by suitably qualified persons who are independent from the persons developing the model;
Copy link18(1)(b)
(b)a follow up validation whenever a significant change is made to the initial margin model and at least annually;
Copy link18(1)(c)(iv)
(iv)the accuracy and appropriateness of volatility and correlation assumptions.
Copy link18(2)Copy link
2.The documentation of the risk management procedures referred to in point (b) of Article 2(2) relating to the initial margin model shall meet all of the following conditions:
18(2)(a)
(a)it shall allow a knowledgeable third party to understand the design and operational detail of the initial margin model;
Copy link18(2)(b)
(b)it shall contain the key assumptions and the limitations of the initial margin model;
Copy link18(2)(c)
(c)it shall define the circumstances under which the assumptions of the initial margin model are no longer valid.
Copy link18(3)Copy link
3.Counterparties shall document all changes to the initial margin model. That documentation shall also detail the results of the validations, referred to in paragraph 1, carried out after those changes.
SECTION 5 — Collateral management and segregation