Featured Product

    PRA Policy on Stressed VaR and RNIV Calculations Under Market Risk

    November 26, 2020

    PRA published the policy statement PS23/20 on the calculation of stressed value at risk (sVAR) and risks not in value at risk (RNIV) under the market risk framework. The policy statement updates the supervisory statement SS13/13 and provides feedback to responses to the consultation paper CP15/20. CP15/20 had proposed to update SS13/13 with expectations related to measurement of RNIV and to the meaning of “period of significant financial stress relevant to the institution’s portfolio” for sVaR calculation. PS23/20 is relevant to all firms to which the Capital Requirements Directive (CRD) IV applies and the updated SS13/13 on market risk will become effective on November 26, 2020.

    Following consideration of the responses received to CP1520, PRA has changed the draft policy to expect that RNIV own funds requirements should be calculated as the average across the preceding three-month period, of an RNIV measure calculated at least monthly (rather than weekly, as proposed in CP15/20). PRA has set an additional expectation that firms should still consider whether more frequent calculation than monthly may be appropriate for more material, or more variable, RNIV positions. PRA has also set an expectation that the relevant RNIV measure for at least 90% of RNIV own funds requirements should be calculated at least monthly. This means that the RNIV measure for up to 10% of RNIV own funds requirements may be calculated less frequently than monthly.

    With respect to sVAR calculation, the majority of respondents that expressed a view agreed with the PRA’s proposed expectations on the observation period used for determining the sVaR stress period. Thus, PRA has decided not to change its expectation that firms should consider an observation period that starts from Monday, January 01, 2007, particularly as the market stresses in 2007 and 2008 remain the most relevant period of stress for a number of firms’ portfolios. PRA notes that its expectation is also consistent with the revised BCBS market risk framework and the Capital Requirement Regulation (CRR) alternative internal model approach for market risk.

    The policy set out in PS23/20 has been designed in the context of the withdrawal of UK from EU and entry into the transition period, during which time UK remains subject to European law. PRA will keep the policy under review to assess whether any changes would be required due to changes in the UK regulatory framework at the end of the transition period, including those arising once any new arrangements with EU take effect. PRA has assessed that the policy would not need to be amended under the EU (Withdrawal) Act 2018.

     

    Related Links

    Effective Date: November 26, 2020

    Keywords: Europe, UK, Banking, COVID-19, Market Risk, RNIV, Value at Risk, CRD IV, CRR, Basel, PS23/20, CP15/20, SS13/13, PRA

    Featured Experts
    Related Articles
    News

    EC Rule on Contractual Recognition of Write Down and Conversion Powers

    The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.

    September 17, 2021 WebPage Regulatory News
    News

    ECB to Consider Climate Risks When Reviewing Collateral Framework

    In a response to the questions posed by a member of the European Parliament, the President Christine Lagarde highlighted the commitment of the European Central Bank (ECB) to an ambitious climate-related action plan along with a roadmap, which was published in July 2021.

    September 17, 2021 WebPage Regulatory News
    News

    SRB Provides Update on Approach to Prior Permissions Regime

    The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.

    September 16, 2021 WebPage Regulatory News
    News

    APRA Issues Further Guidance on Application of Securitization Standard

    The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.

    September 16, 2021 WebPage Regulatory News
    News

    ACPR Publishes Corrective Version of RUBA Taxonomy

    The French Prudential Control and Resolution Authority (ACPR) published the corrective version of the RUBA taxonomy Version 1.0.1, which will come into force from the decree of January 31, 2022.

    September 15, 2021 WebPage Regulatory News
    News

    Nordea Bank and EIB Sign Agreement to Fund Green Projects in Nordics

    The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.

    September 15, 2021 WebPage Regulatory News
    News

    APRA Publishes FAQs on Capital Treatment of Overseas Subsidiaries

    The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.

    September 15, 2021 WebPage Regulatory News
    News

    EBA Finalizes Guidance to Assess Breaches of Large Exposure Limits

    The European Banking Authority (EBA) published the final report on the guidelines specifying the criteria to assess the exceptional cases when institutions exceed the large exposure limits and the time and measures needed for institutions to return to compliance.

    September 15, 2021 WebPage Regulatory News
    News

    PRA Finalizes Changes to Consolidated Prudential Rules Under CRD5/CRR2

    The Prudential Regulation Authority (PRA) issued the policy statement PS20/21, which contains final rules for the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies.

    September 15, 2021 WebPage Regulatory News
    News

    EBA Revises Guidelines on Stress Tests of Deposit Guarantee Schemes

    The European Banking Authority (EBA) revised the guidelines on stress tests to be conducted by the national deposit guarantee schemes under the Deposit Guarantee Schemes Directive (DGSD).

    September 15, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7483