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    EC Sets Out Draft Regulation on Calculation of Jump-to-Default Amounts

    August 12, 2022

    The European Central Bank (ECB) published its opinion on the establishment and functioning of the European Single Access Point (ESAP), which is expected to provide centralized access to publicly available information of relevance to financial services, capital markets, and sustainability, as envisaged in the Capital Markets Union (CMU) Action Plan adopted by the European Commission (EC) in September 2020. In addition, EC published text for delegated regulation that supplements the Capital Requirements Regulation (CRR) with regard to regulatory technical standards specifying the calculation methods of gross jump-to-default amounts for certain exposures as well as specifying the determination of notional amounts of certain instruments.

    The delegated regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union. As part of the improvement brought by the Fundamental Review of the Trading Book (FRTB), a new own funds requirement was introduced under the standardized approach to capture the default risk of exposures to debt and equity instruments. The delegated regulation sets out provisions with respect to the following:

    • Determination of the components P&Llong, P&Lshort, Adjustementlong, and Adjustementshort for the calculation of gross jump-to-default amounts for exposures to debt and equity instruments
    • Estimation of the gross jump-to-default amounts for the exposures referred to in Article 325w(7) of CRR
    • Determination of notional amounts of instruments other than the instruments referred to in Article 325w(4) of CRR

     

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    Keywords: Europe, EU, Banking, CRR, Basel, Jump to Default, Regulatory Capital, Regulatory Technical Standards, FRTB, Market Risk, ESAP, Opinion, ECB, EC

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