EC finalized the delegated regulation 2021/424 that amends the Capital Requirements Regulation (CRR) with regard to the alternative standardized approach for market risk. This regulation amends provisions in CRR to reflect the revised version of the Basel Committee standard on minimum capital requirements for market risk, which was published in January 2019. Regulation 2021/424 shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union. It shall apply from September 30, 2021.
The alternative standardized approach has three components: the sensitivities-based method, the default risk charge, and the residual risk add-on. Each of these three components covers specific types of risks, with the overall own funds requirement for market risk under the alternative standardized approach being the sum of the individual risk charges for all three elements. The CRR revisions under this approach relate to the Articles regarding:
- Calculation of own funds requirements for curvature risk
- Treatment of index instruments and other multi-underlying instruments
- Treatment of positions in collective investment undertakings or CIUs
- Correlations across buckets for equity risk
- Risk-weights for commodity risk
Effective Date: March 31, 2021
Keywords: Europe, EU, Banking, CRR, Market Risk, Standardized Approach, Regulation 2021/424, FRTB, Basel, Regulatory Capital, EC
Previous ArticleEBA Seeks Views on Feasibility Study on Integrated Reporting System
The European Banking Authority (EBA) launched the 2023 European Union (EU)-wide stress test, published annual reports on minimum requirement for own funds and eligible liabilities (MREL) and high earners with data as of December 2021.
The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.
The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.