EC Publishes Regulation on Key Aspects of Implementation of SA-CCR
EC published the Delegated Regulation 2021/931, which supplements the Capital Requirements Regulation (CRR or Regulation 575/2013) with regard to the regulatory technical standards specifying the method for identifying derivative transactions with one or more than one material risk driver. Regulation 2021/931 also sets out the formula for calculating the supervisory delta of call and put options mapped to the interest rate risk category as well as the method for determining whether a transaction is a long or short position in the primary risk driver or in the most material risk driver in the given risk category for the purposes of Article 279a(3)(a) and (b) in the standardized approach for counterparty credit risk. Regulation 2021/931 shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.
The regulation states that for the purpose of identifying transactions with only one material risk driver and transactions with more than one material risk driver, institutions shall, at inception of each transaction, identify all the risk drivers of the transaction by determining the risk factors on which the cash flows of that transaction depend. The risk factors identified by the institutions shall be the risk drivers of the transaction. After the identification of all the risk drivers of a transaction, institutions shall, at inception of each transaction, identify transactions with only one material risk driver by applying the following:
- Where the cash flows of the transaction depend exclusively on one risk driver that belongs to one of the risk categories referred to in Article 277(1) of CRR, institutions shall identify that risk driver as the only material risk driver of that transaction
- Where the cash flows of the transaction depend on more than one risk driver and where institutions have identified only one risk driver of that transaction as material in accordance with either the method laid down in Article 4(3) or the method laid down in Article 4(4) of Regulation 2021/931, institutions shall identify that risk driver as the only material risk driver of that transaction.
The regulation further mentions that institutions shall determine whether a transaction is a long or short position in the primary risk driver or in the most material risk driver in a given risk category by applying either of the following methods:
- They shall calculate the delta risk sensitivities of those risk drivers in accordance with Article 325r of CRR and identify the transaction as a long position in a risk driver where the corresponding delta risk sensitivity is positive or as a short position where the corresponding delta risk sensitivity is negative.
- They shall assess the dependence of the structure of cash flows of the transactions on that risk driver or the hedging purpose of the transaction with respect to that risk driver and identify the transaction as either long or short position on the basis of that assessment.
Related Link: Regulation 2021/931
Effective Date: June 30, 2021
Keywords: Europe, EU, Banking, SA-CCR, CRR, Basel, Credit Risk, Counterparty Credit Risk, Material Risk Driver, Interest Rate Risk, Regulatory Capital, EC
Featured Experts

María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer

Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.

Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
EBA Revises List of Validation Rules for ReportingRelated Articles
EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
EP Reaches Agreement on Corporate Sustainability Reporting Directive
The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).
PRA Consults on Model Risk Management Principles for Banks
The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.
EC Regulation Amends Standards for Calculating Credit Risk Adjustments
The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.
HKMA Announces Launch of Data Repository on Sustainable Finance
The Hong Kong Monetary Authority (HKMA) announced that the Green and Sustainable Finance (GSF) Cross-Agency Steering Group has launched the information and data repositories and outlined the progress made in advancing the development of green and sustainable finance in Hong Kong.
BIS Hub Updates Work Program for 2022, Announces New Projects
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
EIOPA Issues Cyber Underwriting Proposal, Statement on Open Insurance
The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.
NGFS Report on Integration of G-Cubed Model into NGFS Scenarios
The Network for Greening the Financial System (NGFS) published a report that explores the feasibility of integrating the G-Cubed general equilibrium model into the NGFS suite of models.
US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
EIOPA Consults on Review of Securitization Framework in Solvency II
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.