EC Rule Lists Advanced Economies for Market Risk Capital Calculations
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.
Related Links
Keywords: Europe, EU, Banking, CRR, Regulatory Technical Standards, Basel, Regulatory Capital, BCBS, Advanced Economies, Emerging Markets, Market Risk, FRTB, Sensitivities Based Method, EC
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
SRB on CRR Quick-Fix to Policy for Multiple Point of Entry BanksRelated Articles
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
BIS Bulletin Examines Cognitive Limits of Large Language Models
The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.
ECB is Conducting First Cyber Risk Stress Test for Banks
As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.
EBA Continues Momentum Toward Strengthening Prudential Rules for Banks
A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.
EU and UK Agencies Issue Updates on Final Basel III Rules
The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards