Featured Product

    EBA Issues Annual Assessment of Consistency of Internal Model Outcomes

    November 14, 2017

    EBA published two reports on the consistency of risk-weighted assets (RWAs) across all EU institutions authorized to use internal approaches for the calculation of capital requirements. The reports cover market risk as well as credit risk for large corporate, institutions, and sovereign portfolios—collectively referred to as low-default portfolios (LDPs). The results confirm previous findings, with the majority of risk-weights variability explained by fundamentals. These annual EBA-conducted benchmarking exercises are a fundamental supervisory and convergence tool to address unwarranted inconsistencies and restore trust in internal models.

    LDP Credit Risk Exercise. This report presents the results of a supervisory benchmarking exercise of the internal models used for LDPs across a sample of EU institutions. LDPs consist of sovereigns, institutions and large corporates, as these portfolios generally contain few defaults relative to the total number of obligors. The LDP credit risk report examines fferent drivers leading to the observed dispersion across bank models. Most results are broadly in line with the previous LDP exercises, with 61% of the difference in variability explained by a few drivers. The remaining variability could be attributed to differences in riskiness, such as idiosyncratic portfolio features, modeling assumptions, and risk-management practices used by banks, along with the supervisory practices. An analysis was performed to quantify the impact on risk-weights for banks with lower risk-weights. 

    Market Risk Exercise. This report presents the results of the 2017 supervisory benchmarking exercise pursuant to Article 78 of the Capital Requirements Directive (CRD) and the related regulatory and implementing technical standards that define the scope, procedures, and portfolios for benchmarking internal models for market risk. The aim of this exercise was to assess the level of variability observed in risk-weighted exposure amounts for market risk (MRWA) produced by banks’ internal models. 

     

    Related Links

    Keywords: Europe, Banking, Credit Risk, Market Risk, LDP, CRD, RWA, Internal Model, Benchmarking, EBA

    Related Articles
    News

    APRA Publishes Proposal to Increase Transparency of Banking Data

    APRA proposed to substantially increase the volume and breadth of data it makes publicly available on authorized deposit-taking institutions, including banks, credit unions, and building societies.

    December 05, 2019 WebPage Regulatory News
    News

    ESMA Consults on Guide to Internal Controls for Credit Rating Agencies

    ESMA launched a consultation on the guidelines on internal controls for credit rating agencies (CRAs).

    December 05, 2019 WebPage Regulatory News
    News

    EU Finalizes Directive and Prudential Rules for Investment Firms

    EU published, in the Official Journal of the European Union, the Directive (2019/2034) and Regulation (2019/2033) on the prudential requirements and supervision of investment firms.

    December 05, 2019 WebPage Regulatory News
    News

    OSFI Revises Guideline on Principles for Management of Liquidity Risk

    OSFI finalized Guideline B-6 on the principles for the management of liquidity risk.

    December 05, 2019 WebPage Regulatory News
    News

    PRA Consults on Framework to Manage Outsourcing and Third-Party Risk

    PRA published a consultation paper CP30/19 that sets out proposals to modernize the regulatory framework on outsourcing and third-party risk management.

    December 05, 2019 WebPage Regulatory News
    News

    BoE, PRA, and FCA Consult to Strengthen Operational Resilience

    BoE, PRA, and FCA published a shared policy summary and coordinated consultation papers on new requirements to strengthen operational resilience in the financial services sector.

    December 05, 2019 WebPage Regulatory News
    News

    EC Amends Rule on Mapping of External Credit Assessment Institutions

    EC published the implementing regulation (EU) 2019/2028, which amends Regulation 2016/1799, regarding the mapping tables specifying correspondence between the credit risk assessments of external credit assessment institutions (ECAIs) and the credit quality steps set out in the Capital Requirements Regulation.

    December 04, 2019 WebPage Regulatory News
    News

    EBA Issues Second Part of Advice on Implementation of Basel III in EU

    EBA published the second part of its advice on the implementation of Basel III in EU, which complements the report published on August 05, 2019.

    December 04, 2019 WebPage Regulatory News
    News

    EU Approves European Council Proposal on CCP Recovery and Resolution

    EU ambassadors approved the position of European Council on a proposed framework for clearing houses and their authorities to prepare for and deal with financial difficulties.

    December 04, 2019 WebPage Regulatory News
    News

    OSFI Releases Guideline on Foreign Bank Branch Deposit Requirements

    OSFI released the final version of Guideline A-10 on foreign bank branch deposit requirements, along with guideline impact analysis statement.

    December 04, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 4268