The Capital Requirements Regulation (CRR) contains, among other things, specific mandates for the European Banking Authority (EBA) to develop draft Regulatory Technical Standards (RTS) to specify the conditions under which member state competent authorities (NCAs) assess the significance of positions included in the scope of market risk internal models, as well as the methodology that NCAs shall apply to assess an institution’s compliance with the requirements to use an internal model approach (IMA) for market risk.
On 15 December 2015, the EBA issued a consultation document on the draft RTS and the deadline for commenting was 13 March 2016. The EBA has now published a report containing the final draft RTS which are a key component of the European Supervisory Authority’s work to ensure consistency in models’ outputs and comparability of risk-weighted exposures.
When finalising the RTS, the EBA has been mindful of developments at international level in market risk capital standards. In particular it considered the Fundamental Review of the Trading Book that the Basel Committee on Banking Supervision published in January 2016. The final draft RTS introduce some elements that go in the direction of the Basel Committee’s review but, at the same time, can be implemented within the CRR’s current legal setting.
View EBA’s final draft RTS on assessment methodology to validate market risk models under CRR, 22 November 2016