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BOARD DECISION OF THE NATIONAL BANK OF UKRAINE

of April 17, 2018 No. 225-rsh

About approval of the Procedure for coordination of domestic situations of banks in assessment of assets and calculation of the extent of credit risk regarding approaches to determination of values of coefficients of probability of default of the debtor/partner

According to Articles 7, 15 and 56 Laws of Ukraine "About the National Bank of Ukraine", to Articles 44, 66 and 67 Laws of Ukraine "About banks and banking activity" and according to Regulations on determination by banks of Ukraine of the extent of credit risk on the active banking activities approved by the resolution of Board of the National Bank of Ukraine of June 30, 2016 No. 351 (with changes), Board of the National Bank of Ukraine of RESHILO:

1. Approve the Procedure for coordination of domestic situations of banks in assessment of assets and calculation of the extent of credit risk regarding approaches to determination of values of coefficients of probability of default of the debtor/partner which is applied.

2. To department of banking supervision (Degtyarev N. M.) after publication to inform banks of Ukraine information on adoption of this decision.

3. Control over the implementation of this decision to assign to the vice-chairman of the National Bank of Ukraine Rozhkova K. V.

4. The decision becomes effective since June 20, 2018.

Chairman
Ya. V. Smoly

Approved by Board decision of the National Bank of Ukraine of April 17, 2018 , No. 225-rsh

Procedure for coordination of domestic situations of banks in assessment of assets and calculation of the extent of credit risk regarding approaches to determination of values of coefficients of probability of default of the debtor/partner

I. General provisions

1. This Procedure is developed according to Regulations on determination by banks of Ukraine of the extent of credit risk on the active banking activities approved by the resolution of Board of the National Bank of Ukraine of June 30, 2016 No. 351 (with changes) (further - No. Provision 351), for the purpose of establishment of general approaches to assessment and coordination by the National Bank of Ukraine (further - National Bank) domestic situations of banks in assessment of assets and calculation of the extent of credit risk for assets regarding approaches to determination of values of coefficients of probability of default (further - coefficients of PD) which below (better), than average values of coefficients of PD within the ranges determined by the Provision No. 351 for the corresponding classes of the debtor/partner (further - domestic situation).

2. The decision on coordination, refusal in coordination of domestic situation of bank or cancellation of earlier provided coordination accepts Committee on questions of supervision and regulation of activities of banks, supervision (oversight) of payment systems (further - Committee on questions of supervision).

3. Terms in this Procedure are used in the values determined by the legislation of Ukraine, regulatory legal acts of National Bank concerning determination of the extent of credit risk by banks.

II. Procedure for coordination of domestic situation of bank

4. The National Bank considers the following documents received by e-mail for review of domestic situation of bank:

1) the petition of bank for receipt of coordination of domestic situation regarding approaches to determination of values of coefficients of probability of default (PD), which below (better), than average values within the ranges determined by the Provision No. 351 for the corresponding classes of the debtor/partner. In the petition of bank the position, office number, the e-mail address of the contact person of bank concerning coordination of domestic situation of bank for communication with National Bank are specified;

2) the domestic situation of bank approved by the decision of authorized body of bank (the electronic version of provision created in the Microsoft Word format and its skankopiya);

3) the calculations and information used by bank in case of development of domestic situation.

5. Coordination of changes with domestic situation of bank in connection with modification of the parts of approaches to determination of values of coefficients of probability of default (PD) which are not connected with regular updating of domestic situation in connection with change of data is performed according to this procedure. The domestic situation of bank with changes shall be given in the new edition.

For consideration of question of coordination of changes values of coefficients of PD provided by the domestic situation of bank approved by National Bank are applied.

6. For review Committee on supervision the domestic situation of bank which answers the following conditions moves:

The domestic situation of bank provides 1):

accounting of the principle of differentiation in case of determination of values of coefficients of PD for the debtors having various characteristics which influence their capability to provide accomplishment of obligations to bank. Except financial condition, can be such characteristics: quality of management, the market circle, others (which can have influence on the termination of execution by the debtor of the obligations);

application of the approach providing determination of values of coefficients of PD on the 12-month horizon;

determination of values of coefficients of PD taking into account the principle "through cycle (through the cycle)", that is approach which is applied to determination of values of coefficients of PD shall be neutral to phase of economic cycle. For this purpose the bank shall use statistical data about the frequency of probability of default during economic cycle, but at least in five years preceding settlement date;

updating at least once a year taking into account the latest data;

the disaggregated description of all elements of process of determination by bank of values of coefficients of PD which treat:

the procedure of forming of group of debtors based on which values of coefficient of PD, the procedure of cleaning and transformation of group of debtors are determined (if necessary);

methodology of determination of values of coefficients of PD, the principles of its application by bank for determination of values of coefficients of PD with reasons for the reasons and benefits of application of such methodology;

assumptions on which the methodology of determination of values of coefficients of PD is based;

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