Featured Product

    EBA Publishes Standards to Calculate Risk-Weights of CIUs Under CRR

    November 24, 2021

    The European Banking Authority (EBA) published the final report on draft regulatory technical standards for the calculation of risk-weighted exposure amounts of collective investment undertakings or CIUs, in line with the Capital Requirements Regulation (CRR). The final regulatory standards will contribute to the calculation of own funds requirements for the exposures in the form of units or shares in collective investment undertakings under the standardized approach for credit risk. These standards provide clarification on the regulatory treatment for missing inputs when the underlying risk of derivatives is unknown as well as on the computation of the exposure value for counterparty credit risk.

    The report on the draft regulatory standards first clarifies steps to be taken for computing the exposure value of collective investment undertakings’ derivatives exposures where the underlying is unknown. Then, it provides for cases where the calculation of exposure amount to counterparty credit risk of a netting set of collective investment undertakings’ derivative exposures is needed. The draft regulatory standards explain what is considered as insufficient information versus missing inputs and clarify whether market measures provide sufficient information for application of the mandate-based approach for exposures to collective investment undertakings. The draft provisions closely follow both the Basel framework for equity exposures into funds as well as the CRR2 framework for counterparty credit risk. The final report explains the policy choices of regulatory requirements for the draft regulatory standards and outlines their legislative basis. EBA believes that the proposed regulatory requirements ensure a proportionate and technically consistent treatment of exposures to funds.

    CRR2 contains a mandate for EBA to develop draft regulatory technical standards to specify how institutions shall calculate the risk-weighted exposure amount. EBA believes that this mandate for the technical standards in CRR2 is intended to clarify the way forward when the information for applying the mandate-based approach is considered insufficient due to cases of missing inputs for the calculation of exposure values under the mandate-based approach. Moreover, in the case of funds where the total leverage of the fund is limited through market risk measures, which do not limit the actual exposure amounts by specifying limits for the notional amount of derivatives and for the counterparty credit risk exposure incurred by the collective investment undertaking, the mandate-based approach cannot apply and, thus, the approach to be used is the fallback approach. Consequently, the mandate can only be understood as referring to missing inputs for the exposure value calculation, despite having both pieces of information (that is, the maximum extent permitted for investing into exposures and the maximum allowed extent of leverage, if applicable).

     

    Related Links

    Keywords: Europe, EU, Banking, CRR, Basel, Collective Investment Undertaking, Credit Risk, Standardized Approach, Derivatives, Regulatory Technical Standards, Regulatory Capital, Mandate-Based Approach, Counterparty Credit Risk, EBA

    Featured Experts
    Related Articles
    News

    EC Regulation Sets Out Methods for Measuring K-Factors Under IFR

    The European Commission (EC) published the Delegated Regulation 2022/25, which supplements the Investment Firms Regulation (IFR or Regulation 2019/2033) with respect to the regulatory technical standards specifying the methods for measuring the K-factors referred to in Article 15 of the IFR.

    January 11, 2022 WebPage Regulatory News
    News

    BIS Studies How Platform Models Impact Financial Stability & Inclusion

    The Bank of International Settlements (BIS) published a paper that assesses the ways in which platform-based business models can affect financial inclusion, competition, financial stability and consumer protection.

    January 10, 2022 WebPage Regulatory News
    News

    ESAs Publish List of Financial Conglomerates for 2021

    The European Supervisory Authorities (ESAs) published the list of identified financial conglomerates for 2021.

    January 07, 2022 WebPage Regulatory News
    News

    APRA Licenses Two More Banks, Reduces Committed Liquidity Facility

    The Australian Prudential Regulation Authority (APRA) granted license to Barclays Bank PLC and Crédit Agricole Corporate and Investment Bank to operate as foreign authorized deposit-taking institutions under the Banking Act 1959.

    January 06, 2022 WebPage Regulatory News
    News

    EU Issues SII Corrigendum; EIOPA Assesses SII Reporting Exemptions

    EU published, in the Official Journal of the European Union, a corrigendum to the Delegated Regulation 2015/35, which supplements Solvency II Directive (2009/138/EC).

    January 06, 2022 WebPage Regulatory News
    News

    EBA Opines on Impact of De-Risking and Associated AML/CFT Challenges

    The European Banking Authority (EBA) published an Opinion on the scale and impact of de-risking in European Union and the steps that competent authorities should take to tackle unwarranted de-risking.

    January 05, 2022 WebPage Regulatory News
    News

    French Financial Markets Authority Sets Out Priorities for 2022

    The French Financial Markets Authority (AMF) published its 2022 work priorities, along with the supervisory priorities for 2022.

    January 05, 2022 WebPage Regulatory News
    News

    US Agencies Issue Statement on Community Bank Leverage Ratio Framework

    The U.S. Department of the Treasury issued a determination on a request for an exemption, by RBC US Group Holdings LLC, from certain requirements of the rule implementing the qualified financial contracts (QFC) recordkeeping requirements under the Dodd-Frank Act.

    January 04, 2022 WebPage Regulatory News
    News

    FCA Informs About Changes to LIBOR Settings From End-2021

    The Financial Conduct Authority (FCA) announced that publication of 24 LIBOR settings has ended and that, going forward, the 6 most widely used sterling and Japanese yen settings will be published using a changed methodology.

    January 04, 2022 WebPage Regulatory News
    News

    PBC Sets Out Fintech Development Plan for 2022 to 2025

    The People’s Bank of China (PBC) formulated the recently issued Fintech Development Plan (2022 to 2025) under the Outline of the 14th Five-Year Plan (2021-2025) for National Economic and Social Development and the Long-Range Objectives through the Year 2035.

    January 04, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 7854