Featured Product

    PRA Policy on Stressed VaR and RNIV Calculations Under Market Risk

    November 26, 2020

    PRA published the policy statement PS23/20 on the calculation of stressed value at risk (sVAR) and risks not in value at risk (RNIV) under the market risk framework. The policy statement updates the supervisory statement SS13/13 and provides feedback to responses to the consultation paper CP15/20. CP15/20 had proposed to update SS13/13 with expectations related to measurement of RNIV and to the meaning of “period of significant financial stress relevant to the institution’s portfolio” for sVaR calculation. PS23/20 is relevant to all firms to which the Capital Requirements Directive (CRD) IV applies and the updated SS13/13 on market risk will become effective on November 26, 2020.

    Following consideration of the responses received to CP1520, PRA has changed the draft policy to expect that RNIV own funds requirements should be calculated as the average across the preceding three-month period, of an RNIV measure calculated at least monthly (rather than weekly, as proposed in CP15/20). PRA has set an additional expectation that firms should still consider whether more frequent calculation than monthly may be appropriate for more material, or more variable, RNIV positions. PRA has also set an expectation that the relevant RNIV measure for at least 90% of RNIV own funds requirements should be calculated at least monthly. This means that the RNIV measure for up to 10% of RNIV own funds requirements may be calculated less frequently than monthly.

    With respect to sVAR calculation, the majority of respondents that expressed a view agreed with the PRA’s proposed expectations on the observation period used for determining the sVaR stress period. Thus, PRA has decided not to change its expectation that firms should consider an observation period that starts from Monday, January 01, 2007, particularly as the market stresses in 2007 and 2008 remain the most relevant period of stress for a number of firms’ portfolios. PRA notes that its expectation is also consistent with the revised BCBS market risk framework and the Capital Requirement Regulation (CRR) alternative internal model approach for market risk.

    The policy set out in PS23/20 has been designed in the context of the withdrawal of UK from EU and entry into the transition period, during which time UK remains subject to European law. PRA will keep the policy under review to assess whether any changes would be required due to changes in the UK regulatory framework at the end of the transition period, including those arising once any new arrangements with EU take effect. PRA has assessed that the policy would not need to be amended under the EU (Withdrawal) Act 2018.

     

    Related Links

    Effective Date: November 26, 2020

    Keywords: Europe, UK, Banking, COVID-19, Market Risk, RNIV, Value at Risk, CRD IV, CRR, Basel, PS23/20, CP15/20, SS13/13, PRA

    Featured Experts
    Related Articles
    News

    APRA Finalizes Guidance on Management of Climate Change Risks

    The Australian Prudential Regulation Authority (APRA) released the final Prudential Practice Guide on management of climate change financial risks (CPG 229) for banks, insurers, and superannuation trustees.

    November 26, 2021 WebPage Regulatory News
    News

    European Council Adopts Position on Digital Finance Package Proposals

    The European Council adopted its position on two proposals that are part of the digital finance package adopted by the European Commission in September 2020, with one of the proposals involving the regulation on markets in crypto-assets (MiCA) and the other involving the Digital Operational Resilience Act (DORA).

    November 25, 2021 WebPage Regulatory News
    News

    PRA Proposes Rulebook Changes; BoE Extends BEEDS Testing Window

    The Prudential Regulation Authority (PRA) is proposing, via the consultation paper CP21/21, to apply group provisions in the Operational Resilience Part of the PRA Rulebook (relevant for the Capital Requirements Regulation or CRR firms) to holding companies.

    November 25, 2021 WebPage Regulatory News
    News

    EC Proposes New Measures Under Capital Markets Union Package

    The European Commission (EC) has adopted a package of measures related to the Capital Markets Union.

    November 25, 2021 WebPage Regulatory News
    News

    EBA Publishes Standards to Calculate Risk-Weights of CIUs Under CRR

    The European Banking Authority (EBA) published the final report on draft regulatory technical standards for the calculation of risk-weighted exposure amounts of collective investment undertakings or CIUs, in line with the Capital Requirements Regulation (CRR).

    November 24, 2021 WebPage Regulatory News
    News

    FED Outlines Lending Conditions and Supervisory Activities in H1 2021

    The Board of Governors of the Federal Reserve System (FED) published a report that summarizes banking conditions in the United States, along with the supervisory and regulatory activities of FED.

    November 24, 2021 WebPage Regulatory News
    News

    APRA Expects Boards to Strengthen Ability to Oversee Cyber Resilience

    The Australian Prudential Regulation Authority (APRA) recently completed two pilot initiatives in its 2020-2024 Cyber Security Strategy, which was published in November 2020.

    November 23, 2021 WebPage Regulatory News
    News

    FSB Updates List of Global Systemically Important Banks

    The Basel Committee on Banking Supervision (BCBS) published further information related to its 2021 assessment of global systemically important banks (G-SIBs), with additional details to help understand the scoring methodology.

    November 23, 2021 WebPage Regulatory News
    News

    FASB Proposes Improvements to Credit Losses Standard

    The Financial Accounting Standards Board (FASB) is consulting on an Accounting Standards Update and the associated taxonomy improvements for requirements on troubled debt restructurings and vintage disclosures under the credit losses standard (for financial instruments) topic 326.

    November 23, 2021 WebPage Regulatory News
    News

    US Agencies Issue Statement on Crypto-Asset Policy Initiatives

    US Agencies issued a statement that summarizes the work undertaken during the interagency policy sprints focused on crypto-assets and provides a roadmap of future work related to crypto-assets.

    November 23, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7733