There has been published a European Commission services working consultation document concerning proportionality in the future market risk capital requirements and the review of the original exposure method.
In the current text of the Capital Requirements Regulation (CRR) there is a derogation for small trading book businesses (Article 94 CRR) which allows institutions with non-significant trading activities to use a simplified prudential framework to calculate capital requirements for their trading exposures. The Commission services is currently re-assessing this framework. In particular it is re-assessing the thresholds and their definitions. It is also aware that the application of the credit risk framework to some trading activities is not clear and that while capital requirements for credit risk can be easily applied to cash positions (e.g. equities, bonds), its application to derivative and securities financing transactions is less clear. It believes that how material these instruments are on the balance sheets of institutions which are currently using the derogation is something that deserves further attention.
The deadline for responses to the consultation is 24 June 2016.