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    EBA Consults on Initial Reporting Requirements for Market Risk

    November 21, 2019

    EBA launched a consultation on the implementing technical standards on supervisory reporting requirements for market risk. The consultation proposes a thresholds template and a summary template on Alternative Standardized Approach. These are the first elements of the Fundamental Review of the Trading Book (FRTB), which was introduced by the revised Capital Requirements Regulation (CRR2) in the prudential framework of EU. The consultation ends on January 07, 2020. The first reference date for reporting in accordance with these technical standards is foreseen to be on March 31, 2021. The expected implementation period for the proposed reporting requirements is approximately one year.

    This consultation paper includes proposals for the following templates, which are envisaged to be reported with a quarterly frequency:

    • Trading Book and Market Risk Thresholds Template (C 90.00). This template provides insights into the size of institutions’ trading books and the volume of their business subject to market risk. Institutions will only be subject to the FRTB framework in EU, if their trading book business and on- and off-balance sheet business subject to market risk exceeds certain thresholds that are defined in Articles 94 and 325a of CRR. To identify institutions within the scope of application of the FRTB in EU and to ensure that all institutions monitor their business with regard to those thresholds, this proposal includes a thresholds template that captures the size of the trading book and the size of the on- and off-balance sheet business subject to market risk of an institution and is envisaged to be reported by all institutions.
    • Alternative Standardized Approach Summary Template (C 91.00). This template reflects the own funds requirements under the Alternative Standardized Approach for market risk (MKR-ASA). The proposal for reporting on the results of the calculations under the MKR-ASA included in this consultation paper is, for the time being, limited to the summary template, which predominantly captures the size of the positions subject to different approaches and risk classes as well some high-level breakdowns on the related own funds requirements. While this ensures that institutions build up the capacity to perform the calculations needed under the MKR-ASA, preparing themselves for its application for the calculation of own funds requirement, it keeps the implementation burden limited, honoring the "informatory" nature of the reporting requirement. The summary template for the MKR-ASA will, at a later stage, be complemented by additional templates and information items that provide insights into the different steps of the process for calculating own funds requirements under the MKR-ASA.

    Reporting requirements on the Alternative Internal Model Approach for market risk in accordance with Article 430b (3) and (4) CRR are not part of this consultation. Those reporting requirements will be developed once policy aspects of the implementation of that approach have been clarified and addressed in relevant technical standards that are being completed. The EBA submission of the final draft implementing technical standards to the EC is expected to take place in the second quarter of 2020. EBA will also develop the data-point model (DPM), XBRL taxonomy, and validation rules based on the final draft implementing technical standards and publish them alongside the implementing technical standards or shortly after. 

    The reporting requirements on the new market risk framework will be gradually expanded over time. This is because EBA is mindful of the importance of expanding the reporting requirements resulting from the FRTB in a proportionate manner. Therefore, EBA is taking a gradual approach, as institutions will also continue to be subject to the current market risk framework and the associated reporting requirements. This consultation paper is one of the deliverables presented in the EBA Roadmap on the risk reduction measures package, which includes the EBA strategy to implement the revised Capital Requirements Regulation and Directive (CRR2/CRD5), the revised Bank Recovery and Resolution Directive (BRRD2), and the Interchange Fee Regulation (IFR) mandates in the reporting framework.

     

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    Comment Due Date: January 07, 2020

    Keywords: Europe, EU, Banking, Market Risk, FRTB, Reporting, Basel III, CRR/CRD, Implementing Technical Standards, Thresholds Template, Summary Template, EBA

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