On 21 November 2019, the European Banking Authority (EBA) launched a consultation on draft implementing technical standards (ITS) for specific supervisory reporting requirements for market risk, which are the first elements of the Fundamental Review of the Trading Book (FRTB) introduced by the revised Capital Requirements Regulation (CRR2).

The draft ITS are accompanied by three annexes:

  • Annex I (templates);
  • Annex II (instructions); and
  • Annex III (DPM and validation rules).

The EBA’s proposals introduce a thresholds template designed to provide insights into the size of institutions’ trading books and the volume of their business subject to market risk, and a summary template, reflecting the own funds requirements under the ‘Alternative Standardised Approach’ for market risk.

The EBA explains that it is taking a gradual approach because it is mindful of the importance of expanding the reporting requirements resulting from the FRTB in a proportionate manner, as institutions will also continue to be subject to the current market risk framework and the associated reporting requirements. Once clarity on the full implementation of the FRTB framework in the EU exists (including clarity on the implementation of the EBA roadmap on market risk and counterparty credit risk), the framework will be expanded to fully cover the new requirements.

The deadline for comments to the consultation is 7 January 2020. The EBA will hold a public hearing on 2 December 2019. The EBA expects to submit the final draft ITS to the European Commission by Q2 2020.

In addition, the EBA will develop the data-point model, XBRL taxonomy and validation rules based on the final draft ITS and publish them alongside the ITS or shortly after. The first reference date for reporting in accordance with the ITS is expected to be on 31 March 2021, and the implementation period for the proposed reporting requirements is approximately one year.