Featured Product

    US Agencies Ease Requirement for Market Risk Amid COVID Volatility

    May 01, 2020

    US Agencies (FED and OCC) issued response to a public question on increase in the number of backtesting exceptions and the associated capital implications under the market risk capital rule (12 CFR 3, subpart F) in light of the current market conditions. The joint response notes that the agencies took supervisory action in March 2020 and April 2020, giving certain banks the option to apply the multiplication factor that applied as of December 31, 2019, rather than applying a higher multiplier based on the most recent exceptions.

    The market risk capital rule requires that a banking organization identify, once each quarter, the number of business days for which the actual daily net trading loss, if any, exceeds the corresponding daily value-at-risk (VaR) based measure exceptions that have occurred over the preceding 250 business days. A banking organization must then apply a multiplication factor that corresponds to the number of exceptions to determine its VaR-based and stressed VaR-based capital requirements for market risk, unless the banking organization’s primary federal banking regulator notifies the banking organization in writing that a different adjustment or another action is appropriate.

    Additional time may be required to evaluate the root cause of recent backtesting exceptions, which otherwise could result in a capital requirement for market risk that is not commensurate with the firm’s covered positions. When determining whether a different adjustment to a banking organization’s VaR-based and stressed VaR-based capital requirements for market risk is appropriate, the primary federal banking regulator generally considers whether a regime shift has occurred. During March and April of 2020, consistent with section 204(b)(2) of the market risk capital rule, affected banking organizations were notified that they may apply the multiplication factor that applied as of December 31, 2019, to determine VaR-based capital requirements for market risk and stressed VaR-based capital requirement for market risk through September 30, 2020, as a result of the impact of COVID-19 on financial markets.

     

    Related Links

    Keywords: Americas, US, Banking, COVID-19, Market Risk, Regulatory Capital, Backtesting Exception, Value-at-Risk, Pillar 3, Disclosure, Basel, US Agencies

    Featured Experts
    Related Articles
    News

    ESAs Issue Multiple Regulatory Updates for Financial Sector Entities

    The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.

    November 15, 2022 WebPage Regulatory News
    News

    FSB and NGFS Publish Initial Findings from Climate Scenario Analyses

    The Financial Stability Board (FSB) and the Network for Greening the Financial System (NGFS) published a joint report that outlines the initial findings from climate scenario analyses undertaken by financial authorities to assess climate-related financial risks.

    November 15, 2022 WebPage Regulatory News
    News

    FSB Issues Reports on NBFI and Liquidity in Government Bonds

    The Financial Stability Board (FSB) published a letter intended for the G20 leaders, highlighting the work that it will undertake under the Indian G20 Presidency in 2023 to strengthen resilience of the financial system.

    November 14, 2022 WebPage Regulatory News
    News

    ISSB Makes Announcements at COP27; IASB to Propose IFRS 9 Amendments

    The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.

    November 10, 2022 WebPage Regulatory News
    News

    IOSCO Prioritizes Green Disclosures, Greenwashing, and Carbon Markets

    The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.

    November 09, 2022 WebPage Regulatory News
    News

    EBA Finalizes Methodology for Stress Tests, Issues Other Updates

    The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups

    November 09, 2022 WebPage Regulatory News
    News

    EU Finalizes Rules Under Crowdfunding Service Providers Regulation

    The European Union has finalized and published, in the Official Journal of the European Union, a set of 13 Delegated and Implementing Regulations applicable to the European crowdfunding service providers.

    November 08, 2022 WebPage Regulatory News
    News

    OSFI Sets Out Work Priorities and Reporting Updates for Banks

    The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.

    November 07, 2022 WebPage Regulatory News
    News

    APRA Finalizes Changes to Capital Framework, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.

    November 03, 2022 WebPage Regulatory News
    News

    BIS Hub and Central Banks Conduct CBDC and DeFI Pilots

    The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.

    November 03, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8596