4.6.1 General approach for the monitoring of CSRBB

152. Institutions should implement robust internal measurement systems (IMSs) that capture all components and sources of CSRBB which are relevant for the institution’s business model.

153. Institutions should monitor their exposure to CSRBB in terms of potential changes to the different CSRBB measures. Institutions should use complementary features of the different approaches to capture the complex nature of CSRBB over the short-term and long-term time horizons. In particular, institutions should measure and monitor (i) the overall impact of key modelling assumptions on the different CSRBB measures, and (ii) the CSRBB of their banking book derivatives where relevant for the business model.

4.6.2 Methods for monitoring CSRBB

154. Institutions should develop and use their own assumptions and calculation methods for the assessment of CSRBB. The choice of measurement methodology should be adequate for the complexity of the bank itself.

155. The limitations of each quantitative tool and model used should be fully understood by the institution, and these limitations should be taken into account in the CSRBB risk management process. In assessing CSRBB, institutions should be aware of the risks that may arise as a consequence of accounting treatment of transactions in the non-trading book.

156. As an exception, in the practical implementation of paragraph 120 and for proportionality reasons, institutions may include idiosyncratic credit spread components for the monitoring of CSRBB, as long as it is ensured that the measures will yield more conservative results.