What is Decree No. 123 / 2007 Coll.?

Decree No. 123 / 2007 Coll., on prudential business rules of banks, savings and credit cooperatives and securities dealers — Ordinance on prudential business rules for banks, savings and credit cooperatives and securities dealers.

When it became Decree No. 123 / 2007 Coll. effectiveness?

Decree No. 123 / 2007 Coll. became effective 01.07.2007.

Is Decree No. 123 / 2007 Coll. still valid?

Yes, Decree No. 123 / 2007 Coll. is still valid and effective.

Decree No. 123 / 2007 Coll.

Ordinance on prudential business rules for banks, savings and credit cooperatives and securities dealers

Valid Order Effective from 01.07.2007

ČÁST PRVNÍ § 1 § 2 ČÁST DRUHÁ § 3 § 4 § 5 § 6 ČÁST TŘETÍ HLAVA I Díl 1 § 7 § 8 § 9 § 10 § 11 § 12 § 13 § 14 § 15 § 16 § 17 § 18 § 19 § 20 § 21 § 22 § 23 Díl 2 § 24 § 25 § 26 § 27 § 28 § 29 § 30 Díl 3 § 31 § 32 § 33 § 34 HLAVA II § 35 § 36 ČÁST ČTVRTÁ HLAVA I § 37 § 38 § 39 § 40 § 41 § 42 § 43 HLAVA II § 44 § 45 § 46 § 47 § 48 § 49 § 50 § 51 § 52 § 53 HLAVA III Díl 1 § 54 § 55 § 55a § 55b § 56 § 57 § 58 § 59 § 60 § 61 § 62 § 63 Díl 2 § 64 § 65 § 65a § 65b § 66 § 67 § 68 § 69 § 70 § 71 § 72 § 73 HLAVA IV Díl 1 Oddíl 1 § 74 § 75 Oddíl 2 § 76 § 77 Oddíl 3 § 78 § 79 § 80 § 81 § 82 Díl 2 Oddíl 1 § 83 § 84 § 85 § 86 § 87 § 88 § 89 Oddíl 2 § 90 § 91 § 92 § 93 § 94 § 95 § 96 § 97 § 98 § 99 § 100 § 101 Oddíl 3 § 102 § 103 § 104 § 105 § 106 § 107 Oddíl 4 § 108 § 109 § 110 § 111 § 112 § 113 § 114 § 115 Oddíl 5 § 116 § 117 § 118 § 119 § 120 § 121 § 122 § 123 § 124 § 125 § 126 Oddíl 6 § 126a § 126b Díl 3 Oddíl 1 § 127 § 128 § 129 § 130 § 131 § 132 Oddíl 2 § 133 § 134 § 135 § 136 § 137 § 138 § 139 § 139a § 140 § 141 § 142 Oddíl 3 § 143 § 144 § 145 § 146 § 147 § 148 Oddíl 4 § 149 § 150 § 151 Oddíl 5 § 152 § 153 § 154 § 155 § 156 Oddíl 6 § 157 § 158 § 159 § 160 § 161 § 162 Oddíl 7 § 163 § 164 § 165 § 166 Oddíl 8 § 167 § 168 § 169 Díl 4 § 170 § 171 § 172 § 173 § 174 § 175 § 176 § 177 Díl 5 § 178 § 179 ČÁST PÁTÁ HLAVA I Díl 1 § 180 § 181 § 182 § 183 § 184 § 185 Díl 2 § 186 § 187 § 188 § 189 Díl 3 § 189a HLAVA II § 189b § 189c § 189d § 189e ČÁST ŠESTÁ HLAVA I § 190 § 191 § 192 § 193 HLAVA II Díl 1 § 194 § 195 § 196 § 197 § 198 Díl 2 § 199 § 200 § 201 § 202 § 203 § 204 Díl 3 § 205 ČÁST SEDMÁ § 206 § 207 § 208 § 209 § 210 § 211 § 212 § 213 ČÁST OSMÁ § 214 § 215 § 215a § 215b § 216 § 216a § 217 § 218 § 219 § 220 § 221 § 221a § 221b § 222 § 223 ČÁST DEVÁTÁ § 224 § 225 § 226 § 227 § 228 § 229 § 230 § 231 § 232 § 233 § 234 § 235 § 236 § 237

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123

DECLARATION

of 15 May 2007

on prudential business rules for banks, savings and credit cooperatives and securities dealers

The Czech National Bank provides, pursuant to § 8b (5), § 11a (9), § 12a (8), § 12b (8), § 15, § 22 (2), § 24 (1) and § 26d (3) of Act No. 21 / 1992 Coll., on Banks, as amended by Act No. 120 / 2007 Coll., (hereinafter referred to as "Act on Banks'), § 1a (3), § 7a (5), § 7b (9), § 8 (9), § 8b (1), § 11 (3) and § 27 (1) of Act No. 120 / 1995 Coll. (hereinafter referred to as" sporadial and credit cooperatives') and under § 199 (a) (b), (b) of the Act of the Czech National Council Act No. 586 / 1992 Coll.

ČÁST PRVNÍ

INTRODUCTORY PROVISIONS

§ 1

Subject matter

This decree implements the relevant provisions of the European Union2)

(a) the requirements for the management and control system and the content of the verification report for the management and control system, the manner, structure and periodicity of its processing and the deadline for its submission;

(b) capital adequacy,

1. rules for the calculation of capital adequacy, including the procedures applied in the calculation, the rules for the determination of own funds requirements, the determination of individual capital requirements and the definition of approaches for their calculation, the determination of the conditions for the use of basic and special approaches in the calculation of capital requirements and the determination of special approaches for which the authorisation of the authorised supervisory authority is required for the use and change of which is necessary;

2. the details of the request for prior consent to the use of the special approach and the change of the special approach applied to the Czech National Bank,

3. the form and content of the application for inclusion in the list of credit assessment agencies and the requirements for evaluation methods, the credibility and transparency of credit assessments of the person to be included in the list of credit assessment agencies;

(d) rules on the acquisition, financing and assessment of assets;

(e) the content of the data intended for publication on an individual and consolidated basis, including the shortened scope of the data on compliance with prudential business rules, as well as the form, manner, structure, periodicity and time limits of publication and the content of the data verified by the auditor, 3)

(f) the content, form, time and method of submitting certain information and supporting documents to the Czech National Bank; and

(g) criteria for the removal of persons from the consolidation unit for the purposes of compliance with prudential rules on a consolidated basis.

§ 2

Definition of terms

(1) For the purposes of this decree:

(a) a Member State of the European Union or another State constituting the European Economic Area;

(b) delta equivalent to the product of the fair value of the underlying instrument and delta option;

(c) the delta option ratio of the change in the fair value of the option and the change in the fair value of the underlying instrument concerned; it is the first derivative of the fair value of the option according to the fair value of the underlying,

(d) an economically linked group of persons of two or more natural or legal persons who, if not demonstrated otherwise, constitute a single risk because:

1. are interconnected by being in a relationship of controlling and controlling persons; or

2. their relationship is such that the financial difficulties of one person may cause payment difficulties for at least one other person;

(e) exposure to an asset or off-balance sheet item;

(f) a financial institution, a person who is not an institution and who acquires or holds shares in legal persons or carries out any of the activities that may be carried out by the bank, and an investment company, investment fund, pension fund, insurance undertaking and reinsurance undertaking which carry out activities under special laws, including foreign persons with similar activities;

(g) the gamma ratio of the change in the delta option and the change in the fair value of the underlying instrument concerned; it is the second derivative of the fair value of the option according to the fair value of the underlying,

(h) LGD default loss; it is the ratio of the loss from the exposure at the default of the counterparty to the amount due at the time of default;

(i) the PD value of the probability of counterparty default within one year;

(j) an information system, a functional unit ensuring the acquisition, processing, transmission, sharing and storage of information in whatever form.

(2) For the purposes of this Order, the following definitions shall also apply:

(a) institutions

1. credit institution,

2. securities dealers or foreign securities dealers,

(b) the special purpose unit of the person who:

1. is not an institution;

2. is set up for the purpose of performing a securitisation or securitisation;

3. Its activities shall be limited to the actions necessary to achieve that objective; and

4. its legal form and organisational arrangements ensure complete separation of the unit and credit risk of the originator;

(c) the capital investment of a participating security, a business share, a member's share or a similar asset value, or a subordinated claim;

(d) the own funds requirement for the required own funds coverage;

(e) collateral a case, law or other property value used to secure a claim;

(f) the commodity physical product traded on the market;

(g) Macaulay's duration weighted average of the periods between the present and the maturities of each cash flow, where the weights are the real values of their corresponding cash flows;

(h) a small and medium-sized entrepreneur whose annual net turnover is below EUR 50 000 000.

(3) For the purposes of this Order, the following definitions shall also apply:

(a) the value of the financial instruments determined by the clearing centre which the person is required to transfer to the clearing house account as collateral for the duration of the exchange derivatives;

(b) a margin transaction in which the institution provides credit in connection with the transfer of securities or the trading in securities;

(d) the modified duration share in which the numerator is Macaulay duration and the denominator is the sum of one and the return to maturity;

(e) a clean-up call option that gives the originator the right to buy back or repay securitised exposures before all underlying exposures are repaid if the outstanding balance has fallen below a predetermined value;

(f) operational risk of loss due to deficiencies or failures in internal processes, human factor or systems, or risk of loss due to external events, including legal risk;

(g) an authorisation to operate as a bank licence, an authorisation to operate as a savings and credit cooperative ("cooperative reserve") or an authorisation to operate as a securities dealer;

(h) the authorised supervisory authority of the Czech National Bank or other supervisory authority of the Member State which decides on the application for a special approach for the calculation of the capital requirement (4).

(4) For the purposes of this Order, the following definitions shall also apply:

(a) a subordinated claim receivable on the deposit, loan, loan or other claim, the repayment of which is subject to the condition of subordination (5);

(b) by a obliged person:

1. bank,

2. cooperative reserve,

3. Securities dealer; and

4. investment intermediary,

(d) the ASA alternative standardised approach for calculating the capital requirement for operational risk;

(e) the BIA approach of the basic indicator for the calculation of the capital requirement for operational risk;

(f) the IRB Approach for the calculation of the capital requirement for the credit risk of the investment portfolio and the risk of dilution of the investment portfolio based on an internal rating;

(g) by the originator, the person:

1. has participated, alone or in concerted practices, directly or indirectly, in the creation of a contractual obligation or future obligation of another person relating to securitised exposures; or

2. have acquired exposures with credit risk from another person in order to carry out their securitisation;

(h) the risk of dilution of the risk that the amount of the claim is reduced by the cash or non-cash performance provided to the debtor;

(i) securitisation of a transaction or a system of transactions on the basis of which the credit risk associated with one or more exposures is spread across tranches;

1. the financial flows of this transaction or scheme depend on the quality of the underlying exposures; and

2. the subordination of tranches determines the distribution of losses over the period of validity of transactions or of the transaction scheme;

(j) securitised exposure to any exposure in a securitisation;

(k) a jointly managed undertaking by a person who is:

1. institution,

2. a financial institution other than an insurance undertaking, reinsurance undertaking, insurance holding company or mixed-activity insurance holding company (6); or

3. an ancillary service undertaking;

where the person included in the regulated consolidation unit (Section 5) is involved in the management of the person concerned, together with at least one person not included in the regulated consolidation unit whose liability or liability for the person concerned's liabilities is limited by the amount of the share in the capital of the person concerned.

(5) For the purposes of this Order, the following definitions shall also apply:

(a) sponsor a non-originator and creates and manages a securitisation scheme of the type of asset-backed short-term securities programme or another securitisation scheme under which it purchases exposures from third parties;

(b) spot transactions the purchase or sale of financial instruments or commodities with a delivery date such that the period from trade to settlement is not more than 2 days or, where applicable, more than another period according to the market practice;

(c) a synthetic securitisation of a securitisation where the credit risk is spread across tranches using credit derivatives or guarantees, with exposures remaining an asset of the originator;

(d) a traditional securitisation of a securitisation where both the economic and legal transfer of exposures to a special purpose entity is carried out by securities, with the transfer being accompanied by the legal separation of exposures from the originator and the payment to investors is not an obligation of the originator;

(e) transactions with a longer settlement period where a counterparty undertakes to deliver or take over a security, commodity or foreign currency in exchange for cash, another security or commodity, provided that, under the contract, the settlement or delivery date is later than normal for such a transaction on the market, or 5 business days from the trade date of the transaction, if that period is shorter;

(f) a tranche of the contractually created credit risk segment associated with exposures, whereby the position in that segment represents a greater or lesser credit risk than the same large position in any other segment, without taking into account the credit protection provided by third parties to the holders of the position in that segment or other segments;

(g) the book value of the amount in which the asset, liability or equity is shown in the balance sheet or the amount in which the item is shown on the off-balance sheet, with the asset being the amount reduced by the adjustments and adjustments;

(h) by adjusting the valuation of the exposure, the adjustment factor created for the asset, the cumulative depreciation of the asset (written-offs) or the accumulated loss on the fair value measurement of the asset by credit risk;

(i) the CCP is the person who receives the settlement instructions transmitted by the participants in the payment or settlement system and is their sole intermediary in the settlement of orders or transactions;

(j) by a credit institution, a bank, a foreign bank or a cooperative bank.

(6) For the purposes of this Order, the following definitions shall also apply:

(a) the credit derivative of the nth default credit derivative that relates to the basket of exposures, provided that the nth default of any of the exposures is the reason for the hedge performance of the derivative;

(b) a credit derivative of the first default of a credit derivative that relates to a basket of exposures, provided that the first default of any of the exposures is the reason for the performance of the collateral by that derivative and the credit event terminates the contract;

(c) credit enhancement of a contractual arrangement whereby the credit quality of the securitised exposure is increased, with credit enhancement being carried out by the inclusion of multiple subordinated tranches or other type of collateral;

(d) a recognised stock exchange operator recognised by the competent authorities, who operates regularly, shall have rules issued or approved by the competent authorities of the State of its registered office defining the conditions under which the market operates, the conditions for access to the market and the conditions which the instrument must comply with in order to be able to be traded on the market. In the case of a derivative market, the clearing mechanism of that market provides that derivatives are subject to daily margin updates which, in the opinion of the competent authorities, provide for appropriate protection for market participants,

(e) a recognised dealer of securities from a non-Member State, a person who meets the definition of a securities dealer, if established in the territory of the Member States, has been authorised to operate in a non-Member State and is subject to and complies with prudential business rules which are considered to be no less stringent by the supervisory authorities than those laid down by securities dealers;

(f) the weighted sum of modified durations of individual instruments weighted by the real values of those instruments;

(g) a vega change in the fair value of the option in the unit volatility change of the underlying; it is the first derivative of the fair value of the option according to the volatility of the underlying,

(h) a security which is linked to the right of its holder to purchase the instrument at an agreed price within the time-to-maturity or the maturity date of the warning, with settlement being possible either by delivery of the instrument or by cash;

(i) an employee is a person who is with a compulsory person in an employment relationship or other similar relationship, or a person who is a member of a statutory body or other body of a obliged person;

(j) a registered credit rating agency, a person providing credit assessments, which is included in the list of credit assessment agencies under the Banking Act by the Czech National Bank.

(7) For the purposes of this Order, the following definitions shall also apply:

(a) the organisation body of the person or a designated group of persons responsible for carrying out a particular activity of the obliged person;

(b) re-securitisations of a securitisation where the credit risk associated with one or more underlying exposures is spread into tranches and at least one underlying exposure is a securitisation exposure;

(c) a recognised clearing house recognised by the competent authorities, where the settlement of transactions operates on a regular basis, has rules issued or approved by the competent authorities of the State of its registered office defining the conditions under which the settlement takes place and the conditions for access to settlement.

ČÁST DRUHÁ

SCOPE OF THE APPLICATION OF THE EXECUTIVE UNDERTAKING RULES

§ 3

Personal scope

(1) This decree applies to a mandatory person who is a bank or a cooperative reserve.

(2) This decree shall also apply to a mandatory person who is a securities dealer pursuant to § 8a (1), (2) or (3) of the Capital Market Act, with the exception of the provisions of Title II of Part Three, Title II, Part Five, Title 6 and the provisions on more detailed requirements for managing selected risks as set out in Annex 1 to this Decree; a mandatory person who is a securities dealer pursuant to § 8a (2), (3) or § 9b (2) of the Capital Market Business Act shall not be subject to Part Five, Title I.

(3) The mandatory person who is a securities dealer pursuant to § 8a (4) and (7) of the Capital Market Business Act shall be subject to § 7 to 34, with the exception of the provisions on more detailed requirements for managing the selected risks set out in Annex 1 to this Decree.

(4) The compulsory entity which is an investment intermediary under § 29 (1) of the Capital Market Act is subject to § 8, § 9 (1), § 10 to 12, § 14, § 15 (1) to (4), § 16 to 19, § 20 (1), § 21 (1) and (5), § 23, 31, 32 and 34.

(5) A mandatory person who is an investment intermediary who is a natural person and provides investment services exclusively in person,

(a) instead of the requirements laid down in Sections 12, 14, 15 (1) to (4), 19, 21 (1), 23, 31, 32 and 34, it shall record in writing the principles and working procedures for ensuring continuous monitoring of compliance with legal obligations and the performance of business;

(b) capture in writing the principles and working procedures referred to in Articles 9 (1), 10 to 11, 16, 20 (1) and 21 (5); and

(c) continuously monitor compliance with the legal obligations and performance of the activities in accordance with the principles and working procedures recorded in writing.

§ 4

Branch or organisational component of a foreign person

(1) The branch of a foreign bank which does not enjoy the benefits of a single licence under European Union law (hereinafter referred to as the branch of a foreign bank) is subject to the rules on disclosure to the extent set out in Part Seven.

(2) The organisational component of a foreign person who has its registered office in a Member State other than a Member State and may provide investment services in the Czech Republic on the basis of an authorisation granted by the Czech National Bank and is not a branch of a foreign bank (hereinafter referred to as the "branch of the foreign securities dealer") is subject to the rules for the disclosure of information to the extent set out in Part Seven.

§ 5

Regulated consolidation unit

(1) For the purposes of compliance with prudential business rules on a consolidated basis, a consolidated entity under the Bank Act, the Savings and Credit Cooperatives Act or the Capital Market Business Act after the exclusion of persons meeting the criteria under § 6.

(2) The regulated consolidation unit shall:

(a) a bank which is:

1. a domestic controlling bank,

2. the controlling bank but is not a domestic controlling bank or a responsible bank in the group of the financial holding company, with the foreign bank, foreign securities dealer or financial institution having its registered office in a Member State other than the Member State being a member of its consolidation unit;

3. the responsible bank in the group of the financial holding person; or

4. Responsible bank in the group of foreign controlling banks,

(b) a cooperative reserve which is:

1. a responsible credit institution in the group of a financial holding person; or

2. Responsible cooperative reserve within the group of foreign controlling credit institutions,

1. by the domestic controlling agent in securities,

2. the controlling agent of securities but is not a domestic controlling agent of securities or a responsible securities dealer in a group of financial holding persons, with a member of its consolidation unit being a foreign securities dealer, a foreign bank or a financial institution having its registered office in a Member State other than the Member State;

3. the responsible trader in the group of the financial holding person; or

4. Responsible securities trader in the group of foreign controlling securities trader.

§ 6

Criteria for the removal of persons from the consolidation unit

[For Section 26d (3) of the Banking Act, Section 1a (3) of the Savings and Credit Cooperatives Act and Section 199 (2) (b) of the Capital Market Enterprise Act]

(1) A person who:

(a) is not an institution, financial institution or ancillary services undertaking;

(b) is an insurance undertaking, reinsurance undertaking, insurance holding company, insurance holding company with mixed activity or mixed financial holding person (7);

(d) is in bankruptcy or liquidation.

(2) A person who:

(a) it has its registered office in a Member State other than that in which there are legal obstacles to the transfer of the necessary information;

(b) is not a compulsory or financial holding person and its balance sheet total is less than the lower of the values

1. an amount equivalent to EUR 10 000 000; or

2.1% of the balance sheet total of the obliged entity compiling the regulated consolidation whole, in the case of a group of financial holding company or group of foreign controlling banks 1% of the balance sheet total of the financial holding company or foreign controlling banks. Where a financial holding person is not required to draw up financial statements, 1% shall be determined from the balance sheet total of the obliged entity.

However, if the total balance sheet sum of persons who would each individually meet this criterion reaches at least the values referred to in point 1 or 2, those persons shall be included in the regulated consolidation unit. In the period from 31 December to 30 December of the following calendar year, the amount in euro shall be converted into the amount in the crowns of the Czech foreign exchange market rate announced by the Czech National Bank as last in October of the year in which the period begins;

(c) is the person in whom the share is temporarily held, in particular with a view to sale within 12 months; If the share is not sold within 12 months of its acquisition or from the time of the decision to sell it, this criterion for the removal from the consolidation unit cannot be applied. This criterion may not be applied to a obliged entity that compiles a regulated consolidation entity or to a financial holding entity; or

(d) it is not a jointly managed undertaking and is controlled by a obliged entity setting up a regulated consolidation entity or a financial holding person on the basis of a concerted practice with a person not included in a regulated consolidation entity, and that a obliged entity setting up a regulated consolidation entity or a financial holding person would not be a controlling entity without a concerted practice.

(3) If a obliged entity compiling a regulated consolidation entity withdraws a person from the consolidation unit for the purposes of compliance with the prudential rules on a consolidated basis, the Czech National Bank shall demonstrate compliance with the criteria set out in paragraph 2.

ČÁST TŘETÍ

MANAGEMENT AND CONTROL SYSTEM

HLAVA I

REQUIREMENTS FOR THE MANAGEMENT AND CONTROL SYSTEM

[K § 8b (5) of the Banking Act, § 7a (5) of the Savings and Credit Cooperatives Act, § 12f (a) and (b) and § 32 (8) (a) of the Capital Market Act]

Díl 1

Presumption of good governance

§ 7

(1) The management and control system of the obliged entity covers all its activities.

(2) Where the obliged entity fulfils the obligations relating to the management and control system, also on a consolidated basis, the management and control system shall cover the activities of all persons in a regulated consolidation unit. In relation to a jointly managed undertaking, this provision shall apply mutatis mutandis.

§ 8

The obliged entity shall comply with the requirements laid down for the management and control system, taking into account its size, organisational structure, nature, scale and complexity of the activities it carries out or intends to carry out, taking into account developments in the environment in which it operates, including developments in the field of corporate governance.

§ 9

(1) The obliged entity shall ensure that the requirements laid down for the management and control system and procedures of the obliged entity for their fulfilment and in the conduct of other activities are reflected in the organisational rules and other internally defined principles, rules and procedures (hereinafter referred to as "internal rules") of the obliged entity and within a regulated consolidation unit. The mandatory person shall establish a procedure for the adoption, amendment, introduction and application of internal rules. The internal rules always include rules for recording complaints and complaints from clients, including potential clients, handling and monitoring of the measures taken.

(2) In order to fulfil the presumption of good governance by applying proper procedures, the obliged entity shall choose and reflect in its internal rules the selected recognised and proven principles and procedures issued by recognised persons and used in activities of a similar nature ("recognised standard"). The obliged entity shall regularly verify that the internal rules and the recognised standards chosen by it remain up-to-date and proportionate to the extent, nature and complexity of the activities of the obliged entity.

(3) The Czech National Bank publishes in the Bulletin of the Czech National Bank

(a) an overview of selected recognised standards and an overview of selected publishers of recognised standards;

b) Benchmark, which includes expectations of the Czech National Bank in meeting the requirements of this decree.

(4) The projection of the standards referred to in paragraph 3 into internal rules and their application by the obliged person shall be considered to comply with the provisions of paragraph 2, first sentence. This shall be without prejudice to the right of the obliged entity to choose and to reflect other recognised standards in the internal rules; However, their content or use shall not be contrary to or circumvent the provisions of this Decree and other legislation.

§ 10

The obliged entity must ensure that all approval and decision-making processes and control activities, including related responsibilities, powers and internal rules, can be traced back (reconstructed). In order to ensure this requirement, the information storage system that the obliged entity must establish and maintain is also used.

§ 11

(1) Where an activity which would otherwise be carried out or could be carried out by a obliged person is carried out by another person on a contractual basis ("outsourcing '), the obliged entity shall not be relieved of any of its responsibilities for outsourcing activities.

(2) The obliged person shall ensure that, in connection with the negotiation or use of outsourcing:

(a) the compliance of activities subject to outsourcing, with the relevant legislation, the possibility of their control by a mandatory person, the fulfilment of information obligations towards the Czech National Bank, the exercise of supervision, including, where appropriate, the control of facts subject to supervision by the outsourcing provider, and the auditing of the accounts and other verifications provided for by other legislation8),

(b) the conditions for the proper and prudent exercise of the activities of the debtor are not jeopardised;

(d) rules are laid down for the control of outsourcing activities, including, where appropriate, for the control of outsourcing with its provider.

(3) A contract shall be concluded by the obliged person governing outsourcing in such a way as to permit the recording of its contents, controllability and, where appropriate, enforceability as well as conservation.

§ 12

The Supervisory Board, the Audit Board or any other body of a obliged entity having similar powers (hereinafter referred to as the Supervisory Authority) shall monitor and evaluate the functioning and effectiveness of the management and control system at least once a year. As part of the fulfilment of this obligation, the supervisory authority shall also regularly discuss matters relating to the strategic direction of the obliged entity and to the direction of the risks to which the obliged entity is or could be exposed.

§ 13

(1) The supervisory authority is involved in directing, planning and evaluating internal audit and compliance activities (§ 32).

(2) The supervisory authority shall give its views in advance on the proposal of the Board of Directors or any other body having similar powers (hereinafter referred to as "the Board ') of the obliged entity to be entrusted to the natural or legal person by carrying out internal audit or at its appeal. In the event that the internal audit is carried out by more than one staff member, the supervisory authority shall only comment on the proposal for delegation or removal of their senior staff member.

(3) The supervisory authority shall lay down the principles governing the remuneration of the members of the Board and of the person to whom the internal audit is delegated in advance in accordance with paragraph 2 (hereinafter referred to as "the person responsible for carrying out the internal audit '), where this is not within the competence of the general meeting or the member meeting.

(4) The supervisory authority shall approve and regularly evaluate the aggregated remuneration principles of the selected groups of employees whose activities have a significant impact on the overall risk profile [Paragraph 21 (3) (d)] of the obliged entity. The detailed definition of certain remuneration requirements is set out in Annex 1a to this Decree.

§ 14

The Board shall ensure the establishment and evaluation of the management and control system and shall be responsible for the continued maintenance of its functionality and efficiency, including:

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Regulation Information

Citation	Decree No. 123 / 2007 Coll., on prudential business rules of banks, savings and credit cooperatives and securities dealers
Regulation Type	Order
Author	-
Collection	Code of Laws

Date of Promulgation	01.06.2007
Effective from	01.07.2007
Effective until	-
Status	Valid

Legal Areas: Banking, Money Securities Finance Financial control Economic (State) Commercial law Businessman, Company Administrative law State (official) control Accounting

The regulation text is for informational purposes only.