Response to cP on EBA launches consultation on technical standards on the standardised approach for counterparty credit risk
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Additional point :
Clarification that interest rates for the purpose of discounting is not a material risk driver when identifying transactions with only one material risk driver: The “Background and rationale” section of the consultation paper clearly states in points 12 (“disregarding interest rates for the purpose of discounting”) and 21 (“discounting is disregarded as a potential risk driver”) that in order to assess whether a transaction has only one material risk driver, interest rates for the purpose of discounting should not count as a potential risk driver. However, Article 1 of the proposed regulation does not states this as clearly (“risk factors on which the cash flows of the transaction depend”). We believe it would be beneficial for all stakeholders to clarify this point by amending Article 1(1)(a).
Which one of the three options (option 4a: 1 bp, option 4b: 0.1% or option 4c: 1%) do you think is more appropriate as a threshold? Please provide the rationale for the chosen option.
No comment.Please provide examples of cases where the possibility to set the shift ? according to the prevalent market conditions (option 4) might: - provide some benefits - raise some concerns
No comment.Do you consider necessary an adjustment to the supervisory volatility parameter ? as defined in Article 5? In the case an adjustment is considered necessary, how should it be carried out?
No comment.Do you think the specified method for determining whether a transaction is a long or short position in a material risk driver is adequate? If not, please provide an explanation.
The method proposed by EBA for determining whether a transaction is a long or short position in the primary risk driver or in the most material risk driver in a given risk category shall allow the qualitative approach set out in Article 6(b) for transaction where the classification is done using Article 1. The FBF suggests the removal of the following part of Article 6(b): « where institutions apply the approach set out in Article 3(1)(a) ».Additional point :
Clarification that interest rates for the purpose of discounting is not a material risk driver when identifying transactions with only one material risk driver: The “Background and rationale” section of the consultation paper clearly states in points 12 (“disregarding interest rates for the purpose of discounting”) and 21 (“discounting is disregarded as a potential risk driver”) that in order to assess whether a transaction has only one material risk driver, interest rates for the purpose of discounting should not count as a potential risk driver. However, Article 1 of the proposed regulation does not states this as clearly (“risk factors on which the cash flows of the transaction depend”). We believe it would be beneficial for all stakeholders to clarify this point by amending Article 1(1)(a).