December 18, 2018

EBA published a consultation to amend the Commission Implementing Regulation (2016/2070) on benchmarking of internal models to adjust the benchmarking portfolios and reporting requirements in view of the benchmarking exercise it will carry out in 2020. The proposed changes aim to simplify the portfolio structure for the credit risk part of the exercise and to obtain more insights into the model used for pricing for the market risk part of the exercise. The consultation will run until January 31, 2019. EBA also published the draft benchmarking package, which contains, among other documents, the market risk and credit risk reporting templates for the 2020 exercise.

Based on the feedback received from the recent interactions with institutions, the EBA proposals included in this consultation paper aim to facilitate the reporting for the credit risk portfolios. The simplification of the structure of the data collection as well as the reduction of the number of portfolios is expected to enhance the data quality. Furthermore, the objective is to keep the structure of the portfolios stable for the 2021 exercise. The following are the key changes in the definitions of the credit risk portfolios:

  • A reduction in the number of portfolios to be submitted
  • A simplification and alignment in the structure of the portfolios to be submitted
  • A number of technical refinements, such as the inclusion of covered bonds, an update of the indexed loan-to-value range (ILTV), Statistical Classification of Economic Activities of the EU (NACE) and Credit Risk Mitigation (CRM) splits, and the introduction of a sub-sample of large corporates with revenue below or above EUR 500 million.
  • Minor updates related to enhancement of consistency as well as a data collection of the sensitivities, with the aim to further improve the data quality

Article 78 of the Capital Requirements Directive (CRD) requires competent authorities to conduct an annual assessment of the quality of internal approaches used for the calculation of own funds requirements. To assist competent authorities in this assessment, EBA calculates and distributes benchmark values, against which individual institutions' risk parameters can be compared. These benchmark values are based on data submitted by institutions as laid out in EU Regulation 2016/2070, which specifies the benchmarking portfolios, templates, and definitions to be used as part of the annual benchmarking exercises. For the 2020 benchmarking exercise, these proposed changes to the market and credit risk portfolios as well as changes to the reporting templates and instructions are necessary to keep the portfolios up-to-date and the reported data relevant for the above-mentioned assessment.


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Comment Due Date: January 31, 2019

Keywords: Europe, EU, Banking, Internal Models, Benchmarking, CRR/CRD, Implementing Technical Standards, 2020 Benchmarking Exercise, EBA