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

    BIS Report Notes Existing Gaps in Climate Risk Data at Central Banks

    A Consultative Group on Risk Management (CGRM) at the Bank for International Settlements (BIS) published a report that examines incorporation of climate risks into the international reserve management framework.

    July 29, 2022 WebPage Regulatory News
    News

    EBA Examines Remuneration Data and Use of Large Exposure Exemptions

    The European Banking Authority (EBA) published a report that examines the use of certain exemptions included in the large exposures regime under the Capital Requirements Regulation (CRR).

    July 22, 2022 WebPage Regulatory News
    News

    BoE Issues Update on Ongoing Data Transformation Program

    The Bank of England (BoE) issued a communication to firms to provide an update on the progress of the joint data transformation program—which is being led by BoE, the Financial Conduct Authority (FCA), and the industry—for the financial sector in UK.

    July 21, 2022 WebPage Regulatory News
    News

    EBA Issues Draft Methodology and Templates for 2023 Stress Tests

    The European Banking Authority (EBA) published the draft methodology, templates, and template guidance for the European Union-wide stress test in 2023.

    July 21, 2022 WebPage Regulatory News
    News

    EBA Issues SREP Guidelines and Standards for Investment Firms

    The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) jointly published the final guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP) for investment firms.

    July 21, 2022 WebPage Regulatory News
    News

    BoE and PRA Publish Regulatory Updates for Financial Sector Entities

    The Prudential Regulatory Authority (PRA) proposed expectations, via CP8/22, in respect of changes to the instruments or claims that comprise unvested deferred sums awarded to material risk-takers as part of their variable pay.

    July 19, 2022 WebPage Regulatory News
    News

    EIOPA Issues Taxonomy for Solvency II Reporting, Issues Other Updates

    The European Insurance and Occupational Pensions Authority (EIOPA) published Version 2.7.0 of the Solvency II data point model (DPM) and XBRL taxonomy.

    July 16, 2022 WebPage Regulatory News
    News

    OSFI Updates Address BCAR Reporting, Basel Reforms, and Cyber Risk

    The Office of the Superintendent of Financial Institutions (OSFI) updated the 2023 Basel Capital Adequacy Reporting (BCAR) manual as well as the 2023 BCAR return.

    July 15, 2022 WebPage Regulatory News
    News

    FSB Report Outlines Progress on Climate Risk Roadmap

    In a letter to the G20 Leaders, ahead of the July 2022 meeting, the Financial Stability Board (FSB) Chair set out an overview of the key work done by FSB.

    July 14, 2022 WebPage Regulatory News
    News

    SRB Issues Resolvability Assessment and Bail-in Implementation Guide

    The Single Resolution Board (SRB) published its resolvability assessment and "heat map" for 2021, updated the operational guidance on implementation of bail-in tool, and issued the annual report for 2021.

    July 14, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8400