Featured Product

    ECB Guide on Materiality Assessment for Changes to CCR Models

    September 25, 2017

    ECB published its guide on materiality assessment for changes or extensions to counterparty credit risk (CCR) models. The guide indicates how ECB intends to interpret the existing legal framework. In this guide, ECB explains approval criteria for changes to internal models that directly supervised banks use to calculate capital requirements for counterparty credit and credit valuation adjustment risks. The guide should support both institutions and supervisors regarding the ongoing model monitoring activities, the introduction of material model changes, and the respective model approval process.

    The guide assists significant institutions directly supervised by ECB in their self-assessment of the materiality of changes and extensions to internal models used to calculate counterparty credit and credit valuation adjustment (CVA) risks of a business partner, drawing as much as possible on the approaches already defined by EBA for other risk types. Under the Capital Requirements Regulation (CRR), financial institutions can use the internal model method (IMM) for CCR and the advanced method for credit valuation adjustment risk (A-CVA) when calculating capital requirements. These internal models focus on over-the-counter derivatives contracts and securities finance transactions because, for these products, the exposure is calculated in a different way than for a traditional loan, where the exposure is, to a large extent, fixed. The output of these models is one input factor in the calculation of the Pillar 1 capital requirements of a bank. Changes and extensions to both methods require supervisory approval, when such changes or extensions are deemed material.

     

    The implementation of the guide will be part of the day-to-day supervisory dialog with individual banks. A consultation on this guide ran from December 16, 2016 to February 14, 2017. The publication of this guide marks the end of the public consultation process on this.

     

    Related Links

    Guide on Materiality Assessment (PDF)

    Comments Received

    Consultation on Guide

    Keywords: Europe, EU, Banking, CRR, CCR, A-CVA, Internal Models, ECB

    Related Articles
    News

    APRA Revises Related Entities Standard for Banks

    APRA published a strengthened prudential standard APS 222 on associations with related entities, with the aim to mitigate contagion risk within banking groups.

    August 20, 2019 WebPage Regulatory News
    News

    HKMA Revises Implementation Schedule for Initial Margin Rules

    HKMA intends to adopt a revised implementation schedule for the margin requirements for non-centrally cleared derivatives.

    August 16, 2019 WebPage Regulatory News
    News

    HKMA Revises Guideline on Application of Banking Disclosure Rules

    HKMA issued a revised version of the Supervisory Policy Manual module CA-D-1 on guideline on the application of the Banking (Disclosure) Rules (BDR).

    August 16, 2019 WebPage Regulatory News
    News

    ECB Decision on Recognizing Reporting Member States Under AnaCredit

    ECB has finalized the Decision 2019/1348 (ECB/2019/20) that establishes procedure for recognizing non-euro area member states as reporting member states under the AnaCredit Regulation (EU 2016/867).

    August 16, 2019 WebPage Regulatory News
    News

    FASB Proposes to Extend CECL Standard Deadline for Certain Entities

    FASB proposed an Accounting Standards Update that would grant private companies, not-for-profit organizations, and certain small public companies additional time to implement FASB standards on current expected credit losses (CECL), leases, and hedging.

    August 15, 2019 WebPage Regulatory News
    News

    IASB Adds Phase Two of IBOR Reform to Its Work Plan

    IASB (or the Board) has added the second phase of its project focused on potential financial reporting implications linked to the interest rate benchmark reform—interbank offer rate (IBOR) reform—to its work plan.

    August 15, 2019 WebPage Regulatory News
    News

    FED Updates Draft Instructions for Proposed FR Y-14 Reporting Forms

    FED updated draft instructions for the monthly, quarterly, and annual capital assessments and stress testing reports, also known as forms FR Y-14M, FR Y-14Q, FR Y-14A, respectively.

    August 15, 2019 WebPage Regulatory News
    News

    FASB Proposes Taxonomy Changes Related to Topics 326, 815, and 842

    FASB is proposing taxonomy improvements for the proposed Accounting Standards Update on clarifying the interactions among topic 321 on investments in equity securities), topic 323 on investments under equity method and joint ventures), and topic 815 on derivatives and hedging.

    August 15, 2019 WebPage Regulatory News
    News

    OCC Updates Bank Accounting Advisory Series in August 2019

    OCC released an update to the Bank Accounting Advisory Series (BAAS), which reflects accounting standards issued by FASB, through March 31, 2019, on topics such as hedging and credit losses.

    August 15, 2019 WebPage Regulatory News
    News

    APRA Consults on Final Phase Margin Rules for Uncleared Derivatives

    APRA is consulting on amendments to the prudential standard CPS 226 on margin and risk mitigation requirements for non-centrally cleared derivatives.

    August 14, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 3656