EBA Publishes Updated Package for 2020 Internal Model Benchmarking

By Regulatory News

July 16, 2019

Basel III

EBA updated the implementing technical standards on benchmarking of internal approaches in EU. The implementing standards include all benchmarking portfolios that will be used for the 2020 benchmarking exercise. The draft implementing standards will be submitted to EC for endorsement, before being published in the Official Journal of the European Union. The technical standards will apply 20 days after publication in the Official Journal. These revised benchmarking portfolios and reporting requirements are expected to be applicable to the submission of initial market valuation, or IMV, data in the third quarter of 2019 and of other market and credit risk data in 2020—that is, with a reference date of December 31, 2019.

This update includes changes and clarifications, which reflect the comments received during the consultation that was launched on December 18, 2018. A number of changes reduce the reporting requirements, thus ensuring a more proportionate reporting burden, which will also increase stability going forward. For the market risk benchmarking, the instruments have been updated and clarified but the overall composition of the portfolio has not been changed with respect to the 2019. For the credit risk portfolios, the revision of the benchmarking portfolios simplifies the exercise, owing to a reduction in the number of portfolios to be reported and a closer alignment to the Common Reporting (COREP) structure, with a view to achieving stable portfolio definitions for the future.

The Capital Requirements Directive (CRD IV) requires competent authorities to conduct an annual assessment of the quality of internal approaches used for the calculation of own funds requirements. To assist competent authorities in this assessment, EBA calculates and distributes benchmark values against which risk parameters of individual institutions can be compared. These benchmark values are based on data submitted by institutions as laid out in Regulation (EU) 2016/2070, which specifies the benchmarking portfolios, templates, and definitions to be used in the annual benchmarking exercises. For the 2020 benchmarking exercise, changes to the market risk and credit risk portfolios and to the reporting templates and instructions are necessary to keep the portfolios up to date and the reported data relevant for this assessment. The supporting technical package consisting of the data point model (DPM), the validation rules, and the taxonomy are being prepared simultaneously and will be published at a later stage.

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Keywords: Europe, EU, Banking, Internal Models, 2020 Benchmarking, Benchmarking, Credit Risk, Market Risk, CRD IV, Proportionality, EBA

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