EBA Consults on Standards for Internal Model Approach Under FRTB
EBA published its roadmap for the new market and counterparty credit risk approaches. It also launched a consultation on eleven draft regulatory technical standards on the new internal model approach under the Fundamental Review of the Trading Book (FRTB) standards, along with a data collection exercise on non-modellable risk factors (NMRF). The consultations on the regulatory standards end on October 04, 2019.
The draft standards were developed considering the proposals included in EBA discussion paper on "Implementation in the EU of the revised market risk and counterparty credit risk frameworks," which was published on December 18, 2017, and the industry feedback received as a result of the subsequent consultation. The roadmap reflects a prioritization of EBA work in four phases, starting with implementation of the essential parts of the framework and ending with the regulatory products that require, for their development, some experience or feedback from the early stages of the implementation of the framework.
The eleven draft technical standards have been included into three different consultation papers on draft regulatory technical standards on:
- Liquidity horizons for the internal model approach under points (a) to (d) of Article 325bd(7) of the revised Capital Requirements Regulation (CRR2)
- Back-testing requirements under Article 325bf(9) and profit and loss attribution requirements under Article 325bg(4) of CRR2
- Criteria for assessing the modellability of risk factors under the internal model approach under Article 325be(3) of CRR2
These draft technical standards specify essential aspects of the internal model approach under FRTB and represent an important contribution to a smooth and harmonized implementation of FRTB in EU. The entry into force of these technical standards will trigger the three-year-period after which institutions, which have been granted permission to use the new internal model approach for reporting purposes, will be required to report internal model approach figures.
In parallel with the consultation, EBA is launching a data collection exercise on non-modellable risk factors. This exercise is meant to support EBA in fine-tuning and calibrating the methodology presented in the discussion paper with respect to the computation under the internal model approach of the capital charge corresponding to risk-factors that have been identified as non-modellable. To help banks fill in the template, instructions on the data collection (specifying the timeline of the exercise) have also been published. Participating internal model approach institutions are requested to provide data by September 04, 2019.
Related Links
- Press Release
- EBA Roadmap (PDF)
- Draft Standards on Liquidity Horizons (PDF)
- Draft Standards on Back-Testing and P&L Attribution (PDF)
- Draft Standards on Risk Factor Modellability (PDF)
- NMRF Data Collection Template (XLSX)
- Instructions on NMRF Data Collection (PDF)
Comment Due Date: October 04, 2019
Keywords: Europe, EU, Banking, Securities, Market Risk, Counterparty Credit Risk, SA-CCR, FRTB, Internal Model Approach, CRR2, Data Collection, NMRF, Credit Risk, Basel III, EBA
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
SAMA Publishes Financial Entities Ethical Red Teaming FrameworkRelated Articles
BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks
The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.
OSFI Finalizes on Climate Risk Guideline, Issues Other Updates
The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.
BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending
BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.
HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks
The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.
BCBS Report Examines Impact of Basel III Framework for Banks
The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.
PRA Consults on Prudential Rules for "Simpler-Regime" Firms
Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.
DNB Publishes Multiple Reporting Updates for Banks
DNB, the central bank of Netherlands, updated the list of additional reporting requests and published additional data quality checks and XBRL-Formula linkbase documents for the first quarter of 2023.
NBB Sets Out Climate Risk Expectations, Issues Reporting Updates
The National Bank of Belgium (NBB) published a communication on climate-related and environmental risks, issued an update on XBRL reporting
EBA Updates Address Securitization Standards and DGS Guidelines
The European Banking Authority (EBA) published the final draft of the regulatory technical standards that set out conditions for assessment of homogeneity of the underlying exposures in simple, transparent, and standardized (STS) securitizations.
FSB Publishes Letter to G20, Sets Out Work Priorities for 2023
The Financial Stability Board (FSB) published a letter intended for the G20 Finance Ministers and Central Bank Governors, highlighting the work that FSB will take forward under the Indian G20 Presidency in 2023
