Regulatory and Implementing Technical Standards on benchmarking portfolios

Status: Final draft adopted by the EBA and submitted to the European Commission

These ITS and RTS follow the significant work that the EBA conducted on the comparability of capital requirements for internal ratings-based approach (IRBA) for credit risk and market internal risk models, including a series of benchmarking exercises run in 2013. This work has led to a better understanding of the drivers behind differences observed in RWAs across EU institutions. The future benchmarking exercises will continue to play a crucial role in improving comparability of capital requirements calculated using internal approaches.

EBA agrees with the Commission on changes to the amended technical standards on benchmarking of internal approaches

EBA agrees with the Commission on changes to the amended technical standards on benchmarking of internal approaches

12 May 2016

The European Banking Authority (EBA) issued today an Opinion to the European Commission expressing agreement with its proposed amendments to the EBA Implementing Technical Standards (ITS) on benchmarking of internal approaches. These amendments, which were agreed with the EBA building on the experience of the 2014-15 benchmarking exercise, aim at ensuring a better quality of the submitted data and, ultimately, at strengthening the benchmarking analysis performed by the EBA and Competent Authorities. The EBA plans to annually update the ITS and to maintain them on a regular basis to ensure the success and quality of future benchmarking exercises.

Next steps for 2016 and future benchmarking exercise

The amended ITS on benchmarking of internal approaches will allow the EBA to run its 2016 exercise based on the data requirements specified in the amended standards. In particular, the 2016 exercise will cover credit risk for the so-called high-default portfolios (small and medium enterprises and retail) and market risk portfolios as well as some information about the models used to produce the results.
 
All EU institutions using internal approaches to calculate capital requirements will be subject to an assessment of their internal approaches and are required to submit to their Competent Authorities the data on those portfolios by close of business on 30 June 2016.
 
Changes to the ITS will be applied annually since some features of the instruments or counterparties included in the benchmarking portfolios require regular updating as they may become obsolete  or cease to exist.
 
The EBA is currently taking into consideration the changes to the portfolios relevant for the 2017 exercise. These too will be transmitted to the European Commission and published after the adoption by the EBA Board of Supervisors.

Background

The ITS on benchmarking of internal approaches were published and submitted to the European Commission in March 2015. On 20 April 2016 the latter informed the EBA that it intended to adopt the ITS with amendments proposed to the EBA building on the experience of the 2014-15 benchmarking exercise.
 

Press contacts:

Franca Rosa Congiu

E-mail: press@eba.europa.eu - Tel: +44 (0) 207 382 1772

EBA delivers benchmarking package

EBA delivers benchmarking package

02 March 2015

The European Banking Authority (EBA) published a set of papers for benchmarking the internal approaches that EU institutions use to calculate own-funds requirements for credit and market risk exposures. The EBA final draft Regulatory Technical Standards (RTS) and Implementing Technical Standards (ITS) specify in detail the framework for EU institutions and competent authorities to carry out the annual supervisory benchmarking foreseen by the Capital Requirements Directive (CRD IV). The EBA also issued its response to a call for advice by the European Commission's on the benchmarking process. This work is part of the EBA's efforts to address possible inconsistencies in the calculation of risk weighted assets (RWAs) across the EU Single Market and to ultimately restore confidence in EU banks' capital and internal models.
 
The EBA standards define the benchmarking portfolios as well as the methodology that competent authorities across the EU shall use in order to assess the quality of institutions' internal approaches for capital calculation purposes.
 
In particular, the draft implementing technical standards (ITS) specify the benchmarking portfolios as well as the templates, definitions and IT solutions that should be applied in the benchmarking exercise for market and credit risk. The draft regulatory technical standards (RTS) specify the procedures for sharing the assessments between the competent authorities and with the EBA as well as the standards that will be used by competent authorities to assess the internal approaches banks apply to calculate their capital requirements for market and credit risk.
 
The regular benchmarking exercises will allow an assessment of differences in RWAs across EU institutions and the identification of potential underestimation of capital requirements.
 
These standards build on the work carried out by the EBA on the comparability of capital requirements for credit and market risks in the past years and aim at minimising the burden for banks and competent authorities.
 
Finally, the EBA is also publishing its response to a call for advice by the European Commission's on the benchmarking process. In its response to the Commission, the EBA has provided a meaningful although preliminary assessment of different issues related to the functioning of the benchmarking process, such as the usefulness of these kind of exercises, the appropriateness of its scope and frequency, the suitability of the current legal setting, the need to introduce proportionality, or the usefulness of extending the scope of the exercise to include the advanced measurement approaches (AMA) for operational risk.

Legal basis and next steps

These final draft RTS and ITS have been developed in accordance with Article 78 of Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 (Capital Requirements Directive or CRD IV) on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC.
 
The first benchmarking exercise conducted under the ITS and RTS framework will be based on data referred to Q4 2015 observations. Institutions shall report the information by 11 April 2016.
 

Press contacts:

Franca Rosa Congiu

E-mail: press@eba.europa.eu - Tel: +44 (0) 207 382 1772