On 25 June 2020, there was published in the Official Journal of the EU (OJ), Commission Delegated Regulation (EU) 2020/866 of 28 May 2020 amending Delegated Regulation (EU) 2016/1010 supplementing the Capital Requirements Regulation (CRR) with regard to regulatory technical standards for prudent valuation under Article 105(14) of the CRR.
The Commission Delegated Regulation was made in response to the COVID-19 pandemic which has triggered extreme levels of volatility throughout financial markets, affecting multiple asset classes. This has generated increases in asset price dispersion and bid-offer spreads. It is therefore expected that individual additional valuation adjustments computed at the level of valuation exposures will significantly increase in comparison with their levels in normal times.
The rules for prudent valuation are therefore being revised so that, in addition to providing for an aggregation factor to be used under normal market conditions, they also provide that institutions should apply a higher aggregation factor for this period of extreme volatility in market prices due to the COVID-19 pandemic.
The Commission Delegated Regulation enters into force on the day following its publication in the OJ.