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June 29, 2018

EBA published the updated implementing technical standards, which amend Commission Implementing Regulation (EU) 2016/2070, on the benchmarking of internal models. The implementing standards include all benchmarking portfolios that will be used for the 2019 benchmarking exercise. The implementing standards will be submitted to EC for endorsement, before being published in the Official Journal of the European Union. The implementing standards will apply 20 days after publication in the Official Journal.

The update includes changes and clarifications that EBA introduced based on the consultation paper that was published on December 18, 2017. For the market risk benchmarking, the portfolios have been significantly updated. After three years of exercises (2016-2018), a new set of portfolios have been introduced, which are significantly simpler in their composition and consist of plain vanilla instruments. This will allow a broader coverage of the instruments in the 2019 exercise. Minor changes have been introduced for the credit risk portfolios, but adjustments have been made to the data requested from institutions. These changes most notably include the following:

  • Distinction between on- and off-balance-sheet exposures
  • Adjustments to the metrics for benchmarking portfolios
  • New split by collateral types
  • Separation of specialized lending exposures
  • Expiration of the transitional provision that allowed institutions not to report a benchmarking metric based on the standardized approach

Given the type of changes introduced by these implementing standards to the benchmarking portfolios and to the reporting instructions and templates, the relevant annexes have been replaced in their entirety to create a consolidated version of the updated draft implementing technical standards package. These revised benchmarking portfolios and reporting requirements are expected to be applicable for the submission of initial market valuation data in the third quarter of 2018 and of other market and credit risk data in 2019 (that is, with reference date December 31, 2018).

 

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Keywords: Europe, EU, Banking, Implementing Technical Standards, Benchmarking Internal Models, 2019 Benchmarking Exercise, Benchmarking, Internal Models, EBA

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