On 3 August 2023, the European Banking Authority (EBA) published a consultation paper on draft regulatory technical standards (RTS) on extraordinary circumstances for continuing the use of an internal model of discarding certain back-testing overshootings under Article 325az(9) of the Capital Requirements Regulation (CRR).
Per Article 325az(9) of the CRR the draft RTS specify the extraordinary circumstances under which Member State competent authorities may permit an institution to:
- Continue using their alternative internal models for the purpose of calculating the own funds requirements for the market risk of a trading desk that does not meet the back-testing requirements for the market risk of a trading desk that does not meet the back-testing requirements any longer or fails the profit and loss attribution test, and/or
- Limit the add-on to the one resulting from overshootings under back-testing hypothetical changes.
The deadline for comments on the consultation paper is 3 November 2023.
