EBA published its roadmap for the new market and counterparty credit risk approaches. It also launched a consultation on eleven draft regulatory technical standards on the new internal model approach under the Fundamental Review of the Trading Book (FRTB) standards, along with a data collection exercise on non-modellable risk factors (NMRF). The consultations on the regulatory standards end on October 04, 2019.
The draft standards were developed considering the proposals included in EBA discussion paper on "Implementation in the EU of the revised market risk and counterparty credit risk frameworks," which was published on December 18, 2017, and the industry feedback received as a result of the subsequent consultation. The roadmap reflects a prioritization of EBA work in four phases, starting with implementation of the essential parts of the framework and ending with the regulatory products that require, for their development, some experience or feedback from the early stages of the implementation of the framework.
The eleven draft technical standards have been included into three different consultation papers on draft regulatory technical standards on:
- Liquidity horizons for the internal model approach under points (a) to (d) of Article 325bd(7) of the revised Capital Requirements Regulation (CRR2)
- Back-testing requirements under Article 325bf(9) and profit and loss attribution requirements under Article 325bg(4) of CRR2
- Criteria for assessing the modellability of risk factors under the internal model approach under Article 325be(3) of CRR2
These draft technical standards specify essential aspects of the internal model approach under FRTB and represent an important contribution to a smooth and harmonized implementation of FRTB in EU. The entry into force of these technical standards will trigger the three-year-period after which institutions, which have been granted permission to use the new internal model approach for reporting purposes, will be required to report internal model approach figures.
In parallel with the consultation, EBA is launching a data collection exercise on non-modellable risk factors. This exercise is meant to support EBA in fine-tuning and calibrating the methodology presented in the discussion paper with respect to the computation under the internal model approach of the capital charge corresponding to risk-factors that have been identified as non-modellable. To help banks fill in the template, instructions on the data collection (specifying the timeline of the exercise) have also been published. Participating internal model approach institutions are requested to provide data by September 04, 2019.
- Press Release
- EBA Roadmap (PDF)
- Draft Standards on Liquidity Horizons (PDF)
- Draft Standards on Back-Testing and P&L Attribution (PDF)
- Draft Standards on Risk Factor Modellability (PDF)
- NMRF Data Collection Template (XLSX)
- Instructions on NMRF Data Collection (PDF)
Comment Due Date: October 04, 2019
Keywords: Europe, EU, Banking, Securities, Market Risk, Counterparty Credit Risk, SA-CCR, FRTB, Internal Model Approach, CRR2, Data Collection, NMRF, Credit Risk, Basel III, EBA
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