Featured Product

    EBA Publishes Standards Under Internal Approach for Market Risk

    March 21, 2022

    The European Banking Authority (EBA) published the final draft regulatory technical standards on probabilities of default (PDs) and losses given default (LGDs) for default risk model for institutions using the new internal model approach for market risk.

    These final draft regulatory technical standards, under the revised Capital Requirements Regulation or CRR2, specify the requirements for estimating PDs and LGDs using an institution's internal methodology or external sources. Institutions using the internal model approach to compute own funds requirements for market risk are required to compute additional own funds requirement using an internal default risk model for their positions in traded debt and equity instruments included in internal model approach trading desks. The final draft regulatory technical standards specify that an internal methodology used to calculate PDs and LGDs under the default risk model should meet all requirements applicable to the corresponding Internal ratings‐based (IRB) approach. In addition, the draft standards include the possibility for institutions to produce conservative "fallback" PD and LGD values to be used only where needed. These standards specify the requirements that external sources are to fulfill for their use under the default risk model, thus reflecting similar qualitative requirements as those applicable to an internal methodology.

    The consultation period for these draft regulatory standards lasted for three months and ended on October 22, 2020. Post consultation, EBA considered the feedback provided by two respondents in finalizing them. The draft regulatory standards represent a part of the deliverable of the second phase of the EBA roadmap for the new market and counterparty credit risk approaches published on June 27, 2019. They constitute a further contribution to a smooth and harmonized implementation of the Fundamental Review of the Trading Book, or FRTB, international standards in the European Union.

     

    Related Links

     

    Keywords: Europe, EU, Banking, Market Risk, CRR, FRTB, Internal Models, Counterparty Credit Risk, Basel, Regulatory Capital, Default Risk Model, EBA, Subheadline

    Featured Experts
    Related Articles
    News

    EBA Finalizes Templates for One-Off Climate Risk Scenario Analysis

    The European Banking Authority (EBA) has published the final templates, and the associated guidance, for collecting climate-related data for the one-off Fit-for-55 climate risk scenario analysis.

    November 28, 2023 WebPage Regulatory News
    News

    EBA Mulls Inclusion of Environmental & Social Risks to Pillar 1 Rules

    The European Banking Authority (EBA) recently published a report that recommends enhancements to the Pillar 1 framework, under the prudential rules, to capture environmental and social risks.

    October 31, 2023 WebPage Regulatory News
    News

    BCBS Consults on Disclosure of Crypto-Asset Exposures of Banks

    As a follow on from its prudential standard on the treatment of crypto-asset exposures, the Basel Committee on Banking Supervision (BCBS) proposed disclosure requirements for crypto-asset exposures of banks.

    October 19, 2023 WebPage Regulatory News
    News

    BCBS and EBA Publish Results of Basel III Monitoring Exercise

    The Basel Committee on Banking Supervision (BCBS) and the European Banking Authority (EBA) have published results of the Basel III monitoring exercise.

    October 18, 2023 WebPage Regulatory News
    News

    PRA Updates Timeline for Final Basel III Rules, Issues Other Updates

    The Prudential Regulation Authority (PRA) recently issued a few regulatory updates for banks, with the updated Basel implementation timelines being the key among them.

    October 18, 2023 WebPage Regulatory News
    News

    US Treasury Sets Out Principles for Net-Zero Financing

    The U.S. Department of the Treasury has recently set out the principles for net-zero financing and investment.

    October 17, 2023 WebPage Regulatory News
    News

    EC Launches Survey on G7 Principles on Generative AI

    The European Commission (EC) launched a stakeholder survey on the draft International Guiding Principles for organizations developing advanced artificial intelligence (AI) systems.

    October 14, 2023 WebPage Regulatory News
    News

    ISSB Sustainability Standards Expected to Become Global Baseline

    The finalization of the two sustainability disclosure standards—IFRS S1 and IFRS S2—is expected to be a significant step forward in the harmonization of sustainability disclosures worldwide.

    September 18, 2023 WebPage Regulatory News
    News

    IOSCO, BIS, and FSB to Intensify Focus on Decentralized Finance

    Decentralized finance (DeFi) is expected to increase in prominence, finding traction in use cases such as lending, trading, and investing, without the intermediation of traditional financial institutions.

    September 18, 2023 WebPage Regulatory News
    News

    BCBS Assesses NSFR and Large Exposures Rules in US

    The Basel Committee on Banking Supervision (BCBS) published reports that assessed the overall implementation of the net stable funding ratio (NSFR) and the large exposures rules in the U.S.

    September 14, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8938