The European Commission (EC) recently adopted the Delegated Regulation 2022/1622, which sets out the regulatory technical standards to specify the countries that constitute advanced economies for the purpose of specifying risk-weights for the sensitivities to equity and equity repo rate risk factors in accordance with Article 325ap of the Capital Requirements Regulation or CRR (575/2013). The delegated regulation has been published in the Official Journal of the European Union, with the date of effect being October 11, 2022.
This regulation is relevant for the calculation of own funds requirements in line with the sensitivities-based method under the alternative standardized approach for market risk (FRTB-SA). Article 325ap(3) of the CRR requests EBA to specify the economies that should attract a lower risk-weight for equity risk under the FRTB-SA (called "advanced economies"). Other economies are subject to a higher risk-weight. In this context, EBA adopted the Regulation 2022/1622 that lays out regulatory standards specifying the countries that constitute advanced economies. The Regulation specifies that, for the purposes of specifying risk-weights for the sensitivities to equity and equity repo rate risk, the following countries shall constitute advanced economies:
- Member states of the European Union
- The overseas countries and territories that have special relations with Denmark, France, or the Netherlands, including Faeroe Islands and those listed in Annex II to the Treaty on the Functioning of the European Union
- The specified third countries—namely, Australia, Canada, Hong Kong, Japan, Mexico, New Zealand, Singapore, Switzerland, the United Kingdom, the United States—along with the third countries that are parties to the Agreement on the European Economic Area
The Regulation stipulates that, for specifying risk-weights for the sensitivities to equity and equity repo rate risk factors under CRR Article 325ap, countries not listed in paragraph 1 of this Article shall constitute emerging markets.
Keywords: Europe, EU, Banking, CRR, Regulatory Technical Standards, Basel, Regulatory Capital, BCBS, Advanced Economies, Emerging Markets, Market Risk, FRTB, Sensitivities Based Method, EC
Previous ArticleAPRA to Delay Revisions to Prudential Standard on Public Disclosures
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.
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.
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.
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.
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.
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
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.
The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.
The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.
The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.