Featured Product

    EBA Updates Standards for Benchmarking of Internal Approaches

    June 03, 2021

    EBA published an update to the implementing technical standards on benchmarking of internal approaches. The updated implementing technical standards include all benchmarking portfolios and metrics that will be used for the 2022 exercise. The benchmarking exercise is an essential supervisory tool to enhance the quality of internal models, which is particularly important in a stressed economic situation. The exercise covers approved internal approaches used for own funds requirements calculation of credit and market risks as well as internal models used for IFRS 9. The draft implementing technical standards will be submitted to EC for endorsement before being published in the Official Journal of the European Union.

    The Capital Requirements Directive (CRD) IV 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 risk parameters of individual institutions can be compared. These benchmark values are based on data submitted by institutions as laid out in the Commission Implementing Regulation 2016/2070, where the benchmarking portfolios, templates, and definitions to be used as part of the annual benchmarking exercises are specified in more detail. For the 2022 benchmarking exercise, the following changes to the reporting templates and instructions have been deemed necessary:

    • For the market risk benchmarking, the framework is extended to allow the collection of new information, particularly for the collection of sensitivities-based measures. The inclusion of sensitivities will prepare the exercise for the new Fundamental Review of the Trading Book (FRTB) framework for determining capital requirements for market risk in EU. In addition, some instruments have been updated and clarified, while the overall composition of the portfolio has marginally changed with respect to the 2021 exercise. Moreover, the submission deadlines for initial market valuation have been extended by additional two weeks while the submission deadlines for the risk measures have been extended by one week.
    • For the credit risk templates, a limited number of additional data fields was added to understand the level of conservatism incorporated in the risk estimates (Probability of Default and Loss Given Default) and the resulting risk-weighted assets via supervisory imposed add-ons and via the margin of conservatism. In addition, some enhancements were made for the existing data requirements.
    • For the IFRS 9 templates, a limited number of additional data fields has been included to collect information on additional IFRS 9 parameters—in particular the Loss Given Default, in line with the staggered approach communicated in the IFRS 9 roadmap from July 2019.

    The updates also include changes and clarifications EBA has introduced based on the consultation paper on the implementing technical standards amending the Commission Implementing Regulation 2016/2070 with regard to benchmarking of internal models, which was published on December 17, 2020. The Annexes presented in the draft implementing technical standards replace, or are added to, the existing set of templates to create a consolidated version of the updated draft implementing technical standards package.

     

    Related Links

    Keywords: Europe, EU, Banking, Implementing Technical Standards, Benchmarking, Own Funds, Market Risk, Credit Risk, IFRS 9, CRD, Reporting, Probability of Default, Loss Given Default, Internal Models, Regulatory Capital, EBA

    Featured Experts
    Related Articles
    News

    APRA Issues Interim Update to Policy Priorities for 2021 and Beyond

    In a letter addressed to the industry, the Australian Prudential Regulation Authority (APRA) set out an updated schedule of policy priorities for the banking, insurance, and superannuation industries.

    September 24, 2021 WebPage Regulatory News
    News

    EBA Publishes Single Rulebook Q&A, Launches Transparency Exercise

    The European Banking Authority (EBA) published answers to 29 questions in the Single Rulebook Question and Answer (Q&A) tool in September.

    September 24, 2021 WebPage Regulatory News
    News

    EC Adopts Solvency II and Resolution Rules Package for Insurers

    The European Commission (EC) adopted a comprehensive review package of Solvency II rules in the European Union.

    September 22, 2021 WebPage Regulatory News
    News

    OCC Issues Booklets on Regulatory Reporting and Earnings

    The Office of the Comptroller of the Currency (OCC) issued Versions 1.0 of the "Earnings" and "Regulatory Reporting" booklets of the Comptroller's Handbook.

    September 22, 2021 WebPage Regulatory News
    News

    ECB Sets Out Results of Economy-Wide Climate Stress Tests

    The European Central Bank (ECB) published results of its economy-wide climate stress test, which aimed to assess the resilience of non-financial corporates and euro area banks to climate risks.

    September 22, 2021 WebPage Regulatory News
    News

    EBA Examines Implications of Increasing Use of Digital Platforms in EU

    The European Banking Authority (EBA) published a report on the use of digital platforms in the banking and payments sector in European Union.

    September 21, 2021 WebPage Regulatory News
    News

    HKMA Issues Updates on Policy Measures Intended to Ease COVID Impact

    The Hong Kong Monetary Authority (HKMA) published updates on the policy measures that were announced in context of the ongoing pandemic.

    September 21, 2021 WebPage Regulatory News
    News

    ISDA Responds to BCBS Proposal on Treatment of Cryptoasset Exposures

    The International Swaps and Derivatives Association (ISDA), along with several other associations, submitted a joint response to the Basel Committee on Banking Supervision (BCBS) consultation on preliminary proposals for the prudential treatment of cryptoasset exposures.

    September 21, 2021 WebPage Regulatory News
    News

    BIS Quarterly Review Discusses Developments in Fintech and ESG Space

    BIS published the September issue of the Quarterly Review, which contains special features that analyze the rapid rise in equity funding for financial technology firms, the effectiveness of policy measures in response to pandemic, and the evolution of international banking.

    September 20, 2021 WebPage Regulatory News
    News

    BCBS to Consult on Supervisory Practices for Climate Risks by Year-End

    The Basel Committee for Banking Supervision (BCBS) met in September 2021 and reviewed climate-related financial risks, discussed impact of digitalization, and welcomed efforts by the International Financial Reporting Standards (IFRS) Foundation to develop a common set of sustainability reporting standards

    September 20, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7495