Featured Product

    EBA Consults on Regulatory Technical Standards for SA-CCR

    May 02, 2019

    EBA proposed draft regulatory technical standards on the Standardized Approach for Counterparty Credit Risk (SA-CCR). The regulatory technical standards specify methods for mapping of derivative transactions to risk categories, a formula for calculation of the supervisory delta of options mapped to the interest rate risk category, and a method for determining whether derivative transactions are long or short in their risk drivers. The consultation runs until August 02, 2019.

     EBA is proposing a three-pronged methodology for the mapping of derivative transactions to risk categories.

    • The first approach is purely qualitative and suitable for simple and standard derivative transactions; it refers to certain criteria that have to be satisfied.
    • The second approach hinges on a quantitative assessment of the sensitivities with respect to each possible risk driver, to identify the material ones.
    • The third approach, intentionally simple and conservative, identifies all possible risk drivers of a transaction as material and allocates the transaction to all relevant risk-categories. This last approach is always available as a fallback to the second approach.

    EBA also proposes to use, in line with Basel standards, a supervisory delta formula based on a shifted Black-Scholes model that allows dealing with situations of negative interest rates. The shift is intended to move interest rates back into positive territory to make the application of the Black-Scholes model feasible. EBA proposes a methodology for determining the shift to be included in the formula and requests feedback with respect to the different options proposed, including on the possible level of application. Finally, EBA tried to reduce the burden for institutions in the determination of the direction of the position in that particular risk driver (long or short) by leveraging on the same elements (that is, cash flows and sensitivities) that institutions use for the mapping of derivatives to risk categories.

    These draft technical standards specify key aspects of the SA-CCR and represent an important contribution to its smooth harmonized implementation in EU. The draft technical standards were developed based on the mandates included in the latest available version of the proposed amended Capital Requirements Regulation (CRR 2). As all the stages of the legislative procedure for the CRR 2 text have not been completed, the version that was taken into account for drafting these draft regulatory technical standards is the European Parliament legislative resolution of April 16, 2019. Therefore, the proposed draft standards may be amended after the consultation to take into account potential changes in the final CRR 2 text. 

     

    Related Links

    Comment Due Date: August 02, 2019

    Keywords: Europe, EU, Banking, Basel III, SA-CCR, Credit Risk, Counterparty Credit Risk, Regulatory Technical Standards, OTC Derivatives, Market Risk, CRR 2, EBA

    Featured Experts
    Related Articles
    News

    PRA Finalizes Approach to Supervision of International Banks

    In a recent Market Notice, the Bank of England (BoE) confirmed that green gilts will have equivalent eligibility to existing gilts in its market operations.

    July 26, 2021 WebPage Regulatory News
    News

    FCA Issues PS21/9 on Implementation of Investment Firms Regime

    The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.

    July 26, 2021 WebPage Regulatory News
    News

    EBA Proposes Regulatory Standards to Identify Shadow Banking Entities

    The European Banking Authority (EBA) proposed regulatory technical standards that set out criteria for identifying shadow banking entities for the purpose of reporting large exposures.

    July 26, 2021 WebPage Regulatory News
    News

    IOSCO Proposes Recommendations on ESG Ratings and Data Providers

    The Board of the International Organization of Securities Commissions (IOSCO) proposed a set of recommendations on the environmental, social, and governance (ESG) ratings and data providers.

    July 26, 2021 WebPage Regulatory News
    News

    EC to Defer Application of SFDR Standards Till July 2022

    The European Commission (EC) announced plans to defer the application of 13 regulatory technical standards under the Sustainable Finance Disclosure Regulation (2019/2088) by six months, from January 01, 2022 to July 01, 2022.

    July 23, 2021 WebPage Regulatory News
    News

    EIOPA Consults on Reporting and Disclosures Under Solvency II

    The European Insurance and Occupational Pensions Authority (EIOPA) proposed to amend the supervisory statement on supervision of run-off undertakings that are subject to Solvency II regulation.

    July 23, 2021 WebPage Regulatory News
    News

    BoE Consults on Approach to Setting MREL, Publishes Bail-In Guidance

    The Bank of England (BoE) published a consultation paper on approach to setting minimum requirement for own funds and eligible liabilities (MREL), an operational guide on executing bail-in, and a statement from the Deputy Governor Dave Ramsden.

    July 22, 2021 WebPage Regulatory News
    News

    EBA Seeks Views on Proportionality Assessment Methodology

    The European Banking Authority (EBA) is seeking preliminary input on standardization of the proportionality assessment methodology for credit institutions and investment firms.

    July 22, 2021 WebPage Regulatory News
    News

    US Agencies Propose Changes to Call Reports and Instructions

    Certain regulatory authorities in the US are extending period for completion of the review of certain residential mortgage provisions and for publication of notice disclosing the determination of this review until December 20, 2021.

    July 22, 2021 WebPage Regulatory News
    News

    PRA Finalizes Rulebook Definition of Higher Paid Material Risk-Taker

    The Prudential Regulation Authority (PRA) published the policy statement PS18/21, which introduces an amendment in the definition of "higher paid material risk taker" in the Remuneration Part of the PRA Rulebook.

    July 21, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7293