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

    APRA Publishes Proposal to Increase Transparency of Banking Data

    APRA proposed to substantially increase the volume and breadth of data it makes publicly available on authorized deposit-taking institutions, including banks, credit unions, and building societies.

    December 05, 2019 WebPage Regulatory News
    News

    ESMA Consults on Guide to Internal Controls for Credit Rating Agencies

    ESMA launched a consultation on the guidelines on internal controls for credit rating agencies (CRAs).

    December 05, 2019 WebPage Regulatory News
    News

    EU Finalizes Directive and Prudential Rules for Investment Firms

    EU published, in the Official Journal of the European Union, the Directive (2019/2034) and Regulation (2019/2033) on the prudential requirements and supervision of investment firms.

    December 05, 2019 WebPage Regulatory News
    News

    OSFI Revises Guideline on Principles for Management of Liquidity Risk

    OSFI finalized Guideline B-6 on the principles for the management of liquidity risk.

    December 05, 2019 WebPage Regulatory News
    News

    PRA Consults on Framework to Manage Outsourcing and Third-Party Risk

    PRA published a consultation paper CP30/19 that sets out proposals to modernize the regulatory framework on outsourcing and third-party risk management.

    December 05, 2019 WebPage Regulatory News
    News

    BoE, PRA, and FCA Consult to Strengthen Operational Resilience

    BoE, PRA, and FCA published a shared policy summary and coordinated consultation papers on new requirements to strengthen operational resilience in the financial services sector.

    December 05, 2019 WebPage Regulatory News
    News

    EC Amends Rule on Mapping of External Credit Assessment Institutions

    EC published the implementing regulation (EU) 2019/2028, which amends Regulation 2016/1799, regarding the mapping tables specifying correspondence between the credit risk assessments of external credit assessment institutions (ECAIs) and the credit quality steps set out in the Capital Requirements Regulation.

    December 04, 2019 WebPage Regulatory News
    News

    EBA Issues Second Part of Advice on Implementation of Basel III in EU

    EBA published the second part of its advice on the implementation of Basel III in EU, which complements the report published on August 05, 2019.

    December 04, 2019 WebPage Regulatory News
    News

    EU Approves European Council Proposal on CCP Recovery and Resolution

    EU ambassadors approved the position of European Council on a proposed framework for clearing houses and their authorities to prepare for and deal with financial difficulties.

    December 04, 2019 WebPage Regulatory News
    News

    OSFI Releases Guideline on Foreign Bank Branch Deposit Requirements

    OSFI released the final version of Guideline A-10 on foreign bank branch deposit requirements, along with guideline impact analysis statement.

    December 04, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 4268