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

    EBA Issues Erratum for Phase 2 Package of Reporting Framework 3.0

    EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.

    April 08, 2021 WebPage Regulatory News
    News

    EBA Updates Lists of Entities for Use in Capital Calculations under SA

    EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.

    April 08, 2021 WebPage Regulatory News
    News

    MAS Amends Notice on Related Party Transactions of Banks

    MAS amended Notice 643A that addresses requirements for banks to prepare statements of exposures and credit facilities to related concerns or parties.

    April 08, 2021 WebPage Regulatory News
    News

    ECB Amends Guideline on Euro Short-Term Rate

    ECB has published, in the Official Journal of the European Union, the Guideline 2021/565 on the euro short-term rate (€STR) and this guideline amends the previous ECB Guideline 2019/1265.

    April 07, 2021 WebPage Regulatory News
    News

    EBA Consults on Standards Related to FRTB-SA

    EBA launched a consultation on the draft regulatory technical standards on the list of countries with an advanced economy for calculating the equity risk under the alternative standardized approach (FRTB-SA).

    April 07, 2021 WebPage Regulatory News
    News

    PRA Proposes Rules Related to IRB Approach for Credit Risk

    PRA is proposing, via CP7/21, the approach to implementing new requirements related to the specification of the nature, severity, and duration of an economic downturn in the internal ratings-based (IRB) approach to credit risk.

    April 07, 2021 WebPage Regulatory News
    News

    BoE Outlines Regulatory Treatment of Recovery Loan Scheme of UK

    The UK government launched the Recovery Loan Scheme (RLS) as part of its continued COVID-19 support for UK businesses, as announced by HM Treasury on March 03, 2021.

    April 06, 2021 WebPage Regulatory News
    News

    FSB Addresses G20 on COVID Measures, TBTF Reforms, and Climate Risks

    FSB published a letter, from its Chair Randal K. Quarles, to the G20 Finance Ministers and Central Bank Governors, ahead of their virtual meeting on April 07, 2021.

    April 06, 2021 WebPage Regulatory News
    News

    OSFI Unwinds Temporary Increase to Covered Bond Limit for Banks

    OSFI issued a letter to the deposit-taking institutions issuing covered bonds and announced the unwinding of the temporary increase to the covered bond limit for deposit-taking institutions, effective immediately.

    April 06, 2021 WebPage Regulatory News
    News

    EU Amends CRR and Securitization Regulation in Response to Pandemic

    To support recovery from the COVID-19 crisis, EU has published two regulations to amend the securitization framework, as set out in the Securitization Regulation (2017/2402) and the Capital Requirements Regulation or CRR (575/2013).

    April 06, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6826