EBA consults on assessment methodology on the use of internal models for market risk
14 December 2015
The European Banking Authority (EBA) launched today a consultation on its draft Regulatory Technical Standards (RTS) that specify the conditions under which competent authorities assess the significance of positions included in the scope of market risk internal models, as well as the methodology that competent authorities shall apply to assess an institution's compliance with the requirements to use an Internal Model Approach (IMA) for market risk. These draft RTS are a key component of the EBA's work to ensure consistency in models outputs and comparability of risk-weighted exposures and will contribute to harmonise the supervisory assessment methodology across all EU Member States. The consultation runs until 13 March 2016.
In particular, these draft RTS provide objective criteria to be applied in the assessment of the significance of those positions included in the scope of the internal model and propose two different methodologies for general and specific risk categories, both of them based on the standardised rules for market risk.
In addition, the draft RTS set out the standards for the assessment by competent authorities of an institution's compliance with IMA requirements when the institution applies to use an internal model to determine market risk capital requirements or introduces any material changes or extensions to the IMA approach already in use. These draft RTS will also assist competent authorities in assessing whether an institution meets minimum IMA requirements on an ongoing basis following the regular review of its internal model. Consequently, these RTS will need to be embedded by supervisory authorities in their day-to-day practices.
Comments to this consultation can be sent to the EBA by clicking on the "send your comments" button on the consultation page. Please note that the deadline for the submission of comments is 13 March 2016.
A public hearing will then take place at the EBA premises on 25 January 2016 from 14:00 to 17:00 UK time. All contributions received will be published following the close of the consultation, unless requested otherwise.
These draft RTS have been developed according to Article 363(4)(c) of the Capital Requirements Regulation (CRR) which mandates the EBA to develop the assessment methodology for the IMA approach.