Featured Product

    EBA Publishes Standards Under Internal Approach for Market Risk

    March 21, 2022

    The European Banking Authority (EBA) published the final draft regulatory technical standards on probabilities of default (PDs) and losses given default (LGDs) for default risk model for institutions using the new internal model approach for market risk.

    These final draft regulatory technical standards, under the revised Capital Requirements Regulation or CRR2, specify the requirements for estimating PDs and LGDs using an institution's internal methodology or external sources. Institutions using the internal model approach to compute own funds requirements for market risk are required to compute additional own funds requirement using an internal default risk model for their positions in traded debt and equity instruments included in internal model approach trading desks. The final draft regulatory technical standards specify that an internal methodology used to calculate PDs and LGDs under the default risk model should meet all requirements applicable to the corresponding Internal ratings‐based (IRB) approach. In addition, the draft standards include the possibility for institutions to produce conservative "fallback" PD and LGD values to be used only where needed. These standards specify the requirements that external sources are to fulfill for their use under the default risk model, thus reflecting similar qualitative requirements as those applicable to an internal methodology.

    The consultation period for these draft regulatory standards lasted for three months and ended on October 22, 2020. Post consultation, EBA considered the feedback provided by two respondents in finalizing them. The draft regulatory standards represent a part of the deliverable of the second phase of the EBA roadmap for the new market and counterparty credit risk approaches published on June 27, 2019. They constitute a further contribution to a smooth and harmonized implementation of the Fundamental Review of the Trading Book, or FRTB, international standards in the European Union.

     

    Related Links

     

    Keywords: Europe, EU, Banking, Market Risk, CRR, FRTB, Internal Models, Counterparty Credit Risk, Basel, Regulatory Capital, Default Risk Model, EBA, Subheadline

    Featured Experts
    Related Articles
    News

    EU Agencies Update LCR Rule and Macro-Prudential Policy Recommendation

    The European Commission (EC) published the Delegated Regulation 2022/786 with regard to the liquidity coverage requirements for credit institutions under the Capital Requirements Regulation (CRR).

    May 23, 2022 WebPage Regulatory News
    News

    EBA Publishes Regulatory Standards to Identify Shadow Banking Entities

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying the criteria to identify shadow banking entities for the purposes of reporting large exposures.

    May 23, 2022 WebPage Regulatory News
    News

    EIOPA Examines Physical Climate Risk Exposure, SII Non-Compliance

    The European Insurance and Occupational Pensions Authority (EIOPA) published a report assessing insurers' exposure to physical climate change risks

    May 20, 2022 WebPage Regulatory News
    News

    NGFS Report Explores Quantification of Climate Risk Differentials

    The Network for Greening the Financial System (NGFS) published two reports to aid central banks and regulators in their oversight of the financial sector and in their central bank operations

    May 19, 2022 WebPage Regulatory News
    News

    EC Publishes Results on Review of Web Accessibility Directive

    The European Commission (EC) published the results of a public consultation, held in October 2021, on the review of the Web Accessibility Directive.

    May 19, 2022 WebPage Regulatory News
    News

    MAS Consults on Adjustment Spreads for Conversion of SOR Contracts

    The Monetary Authority of Singapore (MAS) and the SC-STS are jointly consulting, until June 10, 2022, on setting adjustment spreads for the conversion of legacy SOR contracts to SORA reference rate.

    May 18, 2022 WebPage Regulatory News
    News

    OSFI Discusses Benchmark Rate Transition, Sets Out Work Priorities

    The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.

    May 17, 2022 WebPage Regulatory News
    News

    EBA Proposes Standards to Support Secondary NPL Markets

    The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.

    May 17, 2022 WebPage Regulatory News
    News

    EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution

    The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).

    May 13, 2022 WebPage Regulatory News
    News

    EBA Issues Standards for Crowdfunding Service Providers Under ECSPR

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.

    May 13, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8206