Featured Product

    ECB Finalizes Methodology to Assess CCR and A-CVA Risk of Banks

    September 18, 2020

    ECB finalized the guide on assessment methodology for the internal model method for calculating exposure to counterparty credit risk (CCR) and the advanced method for own funds requirements for credit valuation adjustment (A-CVA) risk. Under European Union law, banks are allowed to use internal models to calculate the value of their exposures to CCR and CVA risk as long as these models meet regulatory requirements. This guide explains the ECB methodology to assess the validity of such models, especially in internal model investigations. ECB also published a feedback statement on the comments received during the consultation on the draft guide.

    The guide is to be applied in the context of any CCR-related internal model investigation—before or after approval—and the ongoing monitoring of approved internal models. It outlines, for supervisors, how ECB intends to investigate compliance with the existing legal framework when performing these tasks. The assessment methodology determines which model components need to be investigated by supervisors and the minimum level of depth and detail needed to form a supervisory judgment on the model's compliance with the existing regulation. The guide provides optional guidance to significant institutions on the self-assessment of their internal model method and A-CVA models. The guide is also relevant when banks apply to extend or make changes to their models as well as for the ongoing monitoring of such models by ECB. The guide aims to harmonize supervisory practices related to the internal counterparty credit risk models and to provide transparency regarding the methodologies ECB uses to assess the components of these models during investigations. 

     

    Related Links

    Keywords: Europe, EU, Banking, Counterparty Credit Risk, IMM, Internal Models, Credit Valuation Adjustment, Regulatory Capital, OTC Derivatives, Credit Risk, CRR, A-CVA, Supervisory Assessment, ECB

    Featured Experts
    Related Articles
    News

    APRA Sets LAC for D-SIBs, Proposes to Enhance Crisis Preparedness

    APRA issued a letter on the loss-absorbing capacity (LAC) requirements for domestic systemically important banks (D-SIBs) and published a discussion paper, along with the proposed the prudential standards on financial contingency planning (CPS 190) and resolution planning (CPS 900).

    December 02, 2021 WebPage Regulatory News
    News

    EC to Review Macro-Prudential Rules while ESRB Assesses Policy Stance

    The European Commission (EC) launched a call for evidence, until March 18, 2022, as part of a comprehensive review of the macro-prudential rules for the banking sector under the Capital Requirements Regulation (CRR) and Directive (CRD IV).

    December 01, 2021 WebPage Regulatory News
    News

    FSB Sets Out Good Practices for Crisis Management Groups

    The Financial Stability Board (FSB) published a report that sets out good practices for crisis management groups.

    November 30, 2021 WebPage Regulatory News
    News

    APRA Penalizes Heritage Bank for Incorrect Reporting of Capital

    The Australian Prudential Regulation Authority (APRA) found that Heritage Bank Limited had incorrectly reported capital because of weaknesses in operational risk and compliance frameworks, although the bank did not breach minimum prudential capital ratios at any point and remains well-capitalized.

    November 29, 2021 WebPage Regulatory News
    News

    OSFI Releases Annual Report 2021-2022

    The Office of the Superintendent of Financial Institutions (OSFI) released the annual report for 2020-2021.

    November 29, 2021 WebPage Regulatory News
    News

    OSFI Updates Timeline for Implementation of Certain Basel Rules

    Through a letter addressed to the banking sector entities, the Office of the Superintendent of Financial Institutions (OSFI) announced deferral of the domestic implementation of the final Basel III reforms from the first to the second quarter of 2023.

    November 29, 2021 WebPage Regulatory News
    News

    EC Defers Adoption of Regulatory Standards for Disclosures Under SFDR

    EIOPA recently published a letter in which EC is informing the European Parliament and Council that it could not adopt the set of draft regulatory technical standards for disclosures under the Sustainable Finance Disclosure Regulation (SFDR) within the stipulated three-month period, given their length and technical detail.

    November 29, 2021 WebPage Regulatory News
    News

    FCA Releases MIFIDPRU Application Forms and Third Set of Rules on IFPR

    The Financial Conduct Authority (FCA) published the third in a series of policy statements that set out rules to introduce the UK Investment Firm Prudential Regime (IFPR), which will take effect on January 01, 2022.

    November 29, 2021 WebPage Regulatory News
    News

    APRA Finalizes Capital Adequacy Standards for Banks

    The Australian Prudential Regulation Authority (APRA) published, along with a summary of its response to the consultation feedback, an information paper that summarizes the finalized capital framework that is in line with the internationally agreed Basel III requirements for banks.

    November 29, 2021 WebPage Regulatory News
    News

    CPMI-IOSCO Seek Comments on Access to Central Clearing and Portability

    The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) issued a consultative report focusing on access to central counterparty (CCP) clearing and client-position portability.

    November 29, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7751