Notification of model changes

A change to a rating system, as defined in Article 142(1)(1) CRR, only occurs where an institution – which had been granted the permission to use a particular rating system in accordance with Article 143(1) CRR - intends to change any of the approved methods, processes, controls, data collection or IT systems of that rating system that support the assessment of credit risk, the assignment of exposures to rating grades or pools, and the quantification of default and loss estimates. The materiality of such changes has then to be assessed in accordance with Articles 4 and 5 of the Commission Delegated Regulation (EU) No 529/2014 . Any changes to rating systems, which are not material shall be notified to competent authorities in accordance to Article 143(4) CRR and as specified in Article 5(1) of Regulation (EU) No 529/2014. Alignments of a rating system, to the extent that they do not change any of the methods, processes, controls, data collection or IT systems used within that rating system do not constitute a change to a rating system and therefore do not need to be notified in accordance with Article 143(4) CRR. For instance, updates implemented in a fully automatic manner based on the previously approved detailed methods, according to predefined frequencies and without any human judgement can be considered as alignments and thus as being outside of the scope of Regulation (EU) No 529/2014. However, any change of the risk parameter values at the level of the rating system should be assessed against the thresholds specified in Articles 4 and 5 of Regulation (EU) No 529/2014 and any change of the mapping of the ratings or scores to a PD-scale represents a change to a rating system. By contrast, updates of rating assignments at the level of individual obligors or exposures do not change the rating system.