A Bank’s market risk measurement systems, monitoring and controls must enable it to maintain capital adequacy on a continuous basis and remain within its intra-day and other market risk limits.
An independent review of a Bank’s market risk measurement system and the overall market risk management process must be earned out at least annually, as part of the Bank’s own internal auditing process, by functionally independent, appropriately trained and competent personnel.
A Bank must capture all transactions on a timely basis.
A Bank’s internal models must be validated internally by suitably qualified parties independent of the model development process, to ensure that they are conceptually sound and adequately capture all material market risks.
A Bank must have its internal models validated externally by an independent and suitably qualified party on a regular basis and, in addition, on an as-needed basis.
A Bank’s back-testing program must consist of periodic comparisons of its model results with the realized profit or loss (trading income) relating to corresponding periods.