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Federal Register / Vol. 86, No. 208 / Monday, November 1, 2021 / Notices to capture frequent changes in the market sentiment of the companies facing ICC. Section 3 includes descriptions of the credit risk factors.
For each credit risk factor, this section specifies corresponding metrics, relevant definitions, formulas, applicability based on type of counterparty, and key regulatory requirements, among others. The CRS
also considers a qualitative assessment, which allows flexibility to incorporate additional information e.g., business risk, litigation risk, management actions regarding the counterparty into the credit score, and provides a range of possible qualitative assessment scores and qualitative assessment score interpretations. Furthermore, Section 3
notes the use of proxies for counterparties that may not report the exact metrics described in this document.
Model specifications are also included in the CRS Policy. Section 4
describes the calibration of the model component weights. Each credit risk factor receives its own credit risk factorspecific weight. This section notes how credit risk factor weights are determined and discusses the testing of the weights between the financial and market metrics to measure the effectiveness of the scoring model in identifying early signs of weakness. Section 4 further discusses metric parameterization for each credit risk factor and provides input values, metric descriptions, graphical representations, assumptions, parameter sets, and calibrated values, among others.
The CRS Policy specifies the data required for the CRS to compute credit scores and memorializes other information relevant to the CRS. Section 5 includes procedures for collecting data from internal and external sources and describes the case in which component weights are reallocated based on the availability of data. Section 5 further explains how the adequacy of the data is ensured and assigns responsibility for checking the validity of data and remedying inconsistencies.
Under Section 6, the credit risk factors, corresponding metrics and parameterization of the credit scoring model are reviewed at least once a year.
Results are evaluated based on predefined thresholds, which are set out in this section, and actions are taken to update the model parameterization if needed. Section 7 specifies the assumptions and limitations of the CRS.
Section 8 contains a list of references, and Section 9 includes the revision history. The appendices maintain other relevant information for the purpose of using the CRS, including a list of
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proxies and information relevant to metric parameterization.
Retirement of the FCM and Bank Procedures ICC proposes retiring the FCM and Bank Procedures. The below list summarizes where the information in the FCM and Bank Procedures would reside following retirement and differences from the proposed Documents.
Introduction and Overview:
Information in Section I would be moved to Section 1 of the CMPs.
Roles and Responsibilities:
Information in Section II would be moved to Section 2 of the CMPs. The CMPs memorialize the Risk Departments responsibility of presenting information to relevant committees. Moreover, under the CMPs, the PRC is responsible for the approval of FSPs.3
Monitoring Scope: Information in Section III would be moved to Section 4 of the CMPs. While additional procedures or detail is included and there are minor differences in drafting style or terminology, ICC does not propose material changes to its monitoring scope. Procedures are added describing ICCs monitoring of RFT
consumption and how issues are escalated and resulting actions are documented. Language related to ICCs monitoring and management of aggregate exposure to entities with which ICC maintains multiple counterparty relationships is also included, as well as procedures associated with FSP investment allocation and RFT limits. More detail, such as steps for conducting a risk review, possible review outcomes, and criteria for more frequent risk reviews, are also set forth. Further, the list of general information maintained for counterparties in the FCM and Bank Procedures is removed given the additional procedures in the Documents in respect of counterparty review and CRS data.
Clearing House Counterparty Credit Rating System: Information in Section IV would be moved to Section 5 of the CMPs and Sections 24 of the CRS
Policy. While the information is reorganized and additional detail or procedures are included, ICC does not propose material changes to its credit scoring approach. ICC specifies the frequency of review of the credit scoring methodology in Section 5 of the CMPs.
Descriptions of the credit risk factors, metrics, and qualitative assessment are 3 See SRICC2021015 for more information on the responsibilities of the PRC.

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moved to Sections 2 and 3 of the CRS
Policy and information related to metric parameterization and computations, including input values, graphical representations, parameter sets, and calibrated values is moved to Section 4
the CRS Policy. Minor revisions to credit score interpretations are made in the CRS Policy, including removing language associated with the Watch List which would be contained in the CMPs.
Additional language is proposed in the CRS Policy to describe the CRS and credit scoring approach broadly Section 1, model foundations and selection of credit risk factors and metrics Section 3, testing of the weights between metrics and model performance testing Sections 4 and 6, data sources and data quality Section 5, and assumptions and limitations of the CRS Section 7.
Additional Internal Rating Considerations: Information in Section V FCM Procedures only would be moved to Section 4 of the CRS Policy.
Data Proxies: Information in Section VI FCM Procedures and Section V Bank Procedures would be moved to Section 3 of the CRS Policy.
Information Privacy: Information in Section VII FCM Procedures and Section VI Bank Procedures would be moved to Section 8 of the CMPs.
Record Keeping: Information in Section VIII FCM Procedures and Section VII Bank Procedures would be moved to Section 9 of the CMPs.
Watch List Criteria: Information in Section IX FCM Procedures, Section VIII Bank Procedures, and Appendix 3
would be moved to Sections 6 and 7 of the CMPs. The FCM and Bank Procedures list reasons for placing counterparties on the Watch List and Appendix 3 specifies that counterparties exhibiting certain criteria may be placed on the Watch List e.g., deterioration in credit score, capitalization, operational or other violations. The Watch List criteria is updated in the CMPs to distinguish between automatic placement on the Watch List based on credit score and qualitative considerations of counterparty deterioration that may merit placement on the Watch List or movement to a higher Watch List level.
Appendices 1 and 2 are moved to the appendices of the CRS Policy and Appendix 3 is removed.
Consolidation of the FCM and Bank Procedures with respect to counterparty monitoring in the CMPs and with respect to the credit scoring approach in the CRS Policy would allow ICC to avoid unnecessary repetition. The Documents are generally designed to enhance, clarify, and more clearly document descriptions of key ICC

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