On 14 June 2022, the European Commission adopted a Delegated Regulation supplementing the Capital Requirements Regulation (CRR) with regard to regulatory technical standards (RTS) specifying the criteria for assessing the modellability of risk factors under the internal model approach (IMA) and specifying the frequency of that assessment under Article 325be(3) of that Regulation.
The draft RTS:
- Establish two different criteria that institutions are allowed to use to assess the modellability of a risk factor: a) identification at a minimum of 24 verifiable prices which are representative for the risk factor over the preceding 12-months, without any period of 90 days or longer with less than four verifiable prices which are representative for the risk factor; or b) identification at a minimum of 100 verifiable prices which are representative for the risk factor over the preceding 12-months.
- Specify both the requirements that a price should satisfy to be considered verifiable and the requirements under which verifiable prices are considered representative for risk factors, for the purposes of the assessment of modellability.
- Specify the criteria for assessing the modellability of risk factors belonging to specific typologies.
- Specify the frequency under which the modellability assessment should be performed by institutions.
On the same date, the Commission also adopted a Delegated Regulation supplementing the CRR with regard to RTS specifying the technical details of back-testing and profit and loss attribution requirements under Articles 325bf and 325bg of the Regulation. The draft RTS specify the technical elements to be included in the actual and hypothetical changes in the value of the portfolio of an institution for the purposes of Article 325bf of the CRR.
Both Delegated Regulations enter into force on the twentieth day following their publication in the Official Journal of the European Union.