EBA Discussion Paper on Implementing Revised Market Risk Framework
EBA published a discussion paper on the implementation of the revised market risk and counterparty credit risk frameworks in the EU—also known as the Fundamental Review of the Trading Book (FRTB) and the Standardized Approach for Counterparty Credit Risk (SA-CCR), respectively. The discussion paper discusses key technical and operational challenges to implement the FRTB and SA-CCR in the EU. The paper provides preliminary views on the addressal of these implementation issues and seeks early feedback from the stakeholders on the proposals. The paper also puts forward a roadmap for the development of the regulatory deliverables on the FRTB and SA-CCR, which have been included in the second Capital Requirements Regulation (CRR2) proposal. The consultation runs until March 15, 2018.
EC published CRR2 legislative proposal published on November 23, 2016, which proposes, inter alia, to transpose—into EU law—the FRTB and SA-CCR developed by BCBS. The successful implementation of these frameworks in the EU will represent an important collective challenge over the next years. EBA is, therefore, of the view that an open discussion on how to jointly address this challenge is necessary. Without preempting the outcome of ongoing legislative discussions with respect to the CRR2 legislative proposal, with this discussion paper, EBA intends to provide preliminary views on how to address some of the most important implementation issues related to the FRTB and SA-CCR. The discussion paper covers eight implementation issues—two on SA-CCR and six on the FRTB; the paper also requests stakeholder views on additional implementation issues that they may have identified and that are not included in the scope of the paper.
In addition, the discussion paper outlines a roadmap and prioritization for the development of the regulatory deliverables on FRTB and SA-CCR. The roadmap provides a clear indication of intent of how EBA is prioritizing its future work in this area, although priorities may change as part of the ongoing considerations of legislators. The paper will, therefore, contribute to the timely implementation of the revised standards in the EU, as planned by the international standard-setters, while remaining independent of the final FRTB calibration, which will be agreed upon by BCBS.
Related Link: Press Release and Discussion Paper
Comment Due Date: March 15, 2018
Keywords: Europe, EU, Banking, SA-CCR, FRTB, Credit Risk, Market Risk, CRR2, EBA
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