{"id":"circulars/cssf-20-759","title":"Circular CSSF 20/759","type":"circular","date":"2020-12-07","kind":"circular","html":"

Circular CSSF 20/759 is a CSSF circular, published 7 December 2020. Subject: Update of Circular CSSF 12/552, as amended by Circulars CSSF 13/563, 14/597,16/642, 16/647, 17/655, 20/750 and 20/759, on the central administration, internal governance and risk management.

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Relevant for: Credit institutions.

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Keywords: Accounting, Audit Committee, Central administration, Credit risk, Information and communications technology (ICT), Information security, Internal governance, Market risk, Operational risk, Outsourcing, Risk management.

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Text

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Circular CSSF 20/759 UPDATE OF CIRCULAR CSSF 12/552, AS AMENDED BY CIRCULARS CSSF 13/563, CSSF 14/597, CSSF 16/642, CSSF 16/647, CSSF 17/655, CSSF 20/750 AND CSSF 20/759, ON THE CENTRAL ADMINISTRATION, INTERNAL GOVERNANCE AND RISK MANAGEMENT

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We inform you that point 182 (8th indent) of the Annex to Circular CSSF 20/759 as well as point 184 (8th indent) of Annex 1 to Circular CSSF 20/757 have been updated on 11 December 2020.

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In case of discrepancies between the French and the English text, the French text shall prevail.

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Circular CSSF 20/759 Re: Update of Circular CSSF 12/552, as amended by Circulars CSSF 13/563, CSSF 14/597, CSSF 16/642, CSSF 16/647, CSSF 17/655, CSSF 20/750 and CSSF 20/759, on the central administration, internal governance and risk management

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Luxembourg, 7 December 2020

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Ladies and Gentlemen,

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To all credit institutions and professionals performing

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  1. By way of this circular, the CSSF, in its capacity as competent authority, complies with the guidelines of the European Banking Authority listed in point
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lending operations

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  1. The CSSF has integrated these guidelines into its administrative practice and regulatory approach with a view to promote supervisory convergence in this field at European level. 2. The following guidelines are concerned: (1)
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on internal governance (EBA/GL/2017/11) and

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(2)

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Joint ESMA and EBA Guidelines on the assessment of the suitability of members of the management body and key function holders (EBA/GL/2017/12);

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(3)

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on the application of the definition of default under Article 178 of Regulation (EU) No 575/2013 (EBA/GL/2016/07);

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(4)

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on specification of types of exposures to be associated with high risk (EBA/GL/2019/01);

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(5)

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on the management of interest rate risk arising from non-trading book activities (EBA/GL/2018/02);

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(6)

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on corrections to modified duration for debt instruments under the second subparagraph of Article 340(3) of Regulation (EU) 575/2013 (EBA/GL/2016/09).

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  1. The above-mentioned guidelines have been incorporated into Circular CSSF 12/552 on central administration, internal governance and risk management. At the same time, the terminology and definitions of the circular have been reviewed and some provisions have been specified. A version of the circular which allows retracing the changes made is appended to this circular. 4. The main changes concern: a.
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Extension of the scope to financial holding companies and mixed financial holding companies;

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Specification of the concept of proportionality by linking it to the notion of systemic institution within the meaning of the Law of 5 April 1993 on the financial sector;

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Clarifications regarding the application of proportionality when implementing the internal control functions;

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Strengthening of the management body, in its supervisory function, via enhanced provisions with respect to diversity and independence;

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Consideration of environmental, social and governance (ESG) risk factors with a view to ensuring viability of the business model;

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Introduction of a summary chapter dedicated to the activity of depositary bank.

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  1. Circular CSSF 12/552, as amended, shall be applicable in its entirety to credit institutions and in part to professionals performing lending operations. Henceforth, a separate circular applies to investment firms. 6. This circular shall apply as from 1 January 2021.
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Françoise KAUTHEN

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Claude MARX

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Annex

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The color code used for the “track changes” version is as follows: •

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Red for addition/deletion

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Green for text movement

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In case of discrepancies between the French and the English text, the French text shall prevail.

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The text above is the opening of the document; the PDF carries the whole.

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Document page, PDF. Source: Commission de Surveillance du Secteur Financier (CSSF), reproduced with the CSSF's consent. The French text prevails.

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