On 3 February 2025, the European Commission adopted a Delegated Regulation amending the regulatory technical standards laid down in Delegated Regulation (EU) 2022/2059, Delegated Regulation (EU) 2022/2060 and Delegated Regulation (EU) 2023/1577 as regards the technical details of back-testing and profit and loss attribution requirements, the criteria for assessing the modellability of risk factors, and the treatment of foreign-exchange risk and commodity risk in the non-trading book.
As regards the:
- Details on the profit and loss attribution test, the Delegated Regulation removes the aggregation formula for computing the total own funds requirements for market risk for an institution using the alternative internal model approach as this formula has been now introduced in the Capital Requirements Regulation via Regulation (EU) 2024/1623.
- Risk factors’ modellability assessment, the Delegated Regulation ensures that institutions are able to identify how far they rely on a third-party vendor for the purpose of assessing the modellability of a risk factor.
- Treatment of foreign exchange and commodity risk in the non-trading book, the Delegated Regulation ensures that translation risk is duly captured by institutions in light of the provisions introduced in Article 325b of Regulation (EU) No 575/2013.