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

    EBA Sets Out Roadmap for 2023, Updates Reporting Framework 3.2

    The European Banking Authority (EBA) published its work program for 2023 as well as the technical package for phase 3 of version 3.2 of its reporting framework.

    September 30, 2022 WebPage Regulatory News
    News

    FED Announces Launch of Climate Scenario Analysis Exercise in 2023

    The Board of Governors of the Federal Reserve System (FED) announced a pilot climate scenario analysis exercise for six largest banks in the U.S.

    September 29, 2022 WebPage Regulatory News
    News

    BIS Paper Studies Impact of Fintech Lending on Small Businesses in US

    The Bank for International Settlements (BIS) published a paper that studies impact of fintech lending on credit access for small businesses in U.S.

    September 26, 2022 WebPage Regulatory News
    News

    UK Regulators Issue CRR Changes and Stress Test Scenarios for Banks

    The Prudential Regulation Authority (PRA) issued the policy statement PS8/22 to amend the Own Funds and Eligible Liabilities (CRR) Part of the PRA Rulebook and update the supervisory statement SS7/13 titled "Definition of capital (CRR firms).

    September 26, 2022 WebPage Regulatory News
    News

    EBA Launches EU-Wide Transparency Exercise in 2022

    The European Banking Authority (EBA) launched the EU-wide transparency exercise for 2022, with results of the exercise expected to be published at the beginning of December, along with the annual Risk Assessment Report.

    September 23, 2022 WebPage Regulatory News
    News

    SRB on CRR Quick-Fix to Policy for Multiple Point of Entry Banks

    The Single Resolution Board (SRB) welcomed the adoption of the review of the Capital Requirements Regulation, or CRR, also known as the "CRR quick-fix."

    September 22, 2022 WebPage Regulatory News
    News

    EC Rule Lists Advanced Economies for Market Risk Capital Calculations

    The European Commission (EC) recently adopted the Delegated Regulation 2022/1622, which sets out the regulatory technical standards to specify the countries that constitute advanced economies for the purpose of specifying risk-weights for the sensitivities to equity.

    September 21, 2022 WebPage Regulatory News
    News

    EBA Publishes Final Regulatory Standards on STS Securitizations

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.

    September 20, 2022 WebPage Regulatory News
    News

    ECB Further Reviews Costs and Benefits Associated with IReF

    The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.

    September 15, 2022 WebPage Regulatory News
    News

    EBA Publishes Funding Plans Report, Receives EMAS Certification

    The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).

    September 15, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8523