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GBIC - German Banking Industry Committee

Analogous to and consistent with the provision in the old standardised approach (Art. 352, (3) CRR), the FRTB approaches should also offer such an option.

A strict interpretation of the use of book value in the sense of necessary extraction of the data from the accounting system should be avoided so as to allow banks flexibility concerning their technical equipment. Banks should be able to use sufficiently accurate book values, e.g. from the Front-Office system, in so far as this is reasonable from the risk and technical perspective.
The proposal of not requiring daily revaluation of the underlying asset is reasonable. Consistent daily revaluation of underlying assets to the necessary quality would not be possible at all or only with a great deal of effort; and it would be scarcely advantageous compared with the proposed approach due to the relatively low dynamics of the banking book.

It should be clarified that banks can update parts of their transactions faster than other exposures depending on their technical needs.
No comment
The proposed linear methodology seems very conservative, as the probability of impairments comparatively is low especially for stable currencies. Here, individual modelling should also be possible for Standardised Approach banks (SA banks) as an alternative.
There is a risk that the proposed adjustments might create larger open FX risk exposures that are difficult for banks to hedge.

In addition, Internal Models Approach banks (IMA banks) should in any cases be allowed to apply risk modelling for these exposures (see below Q9 / Q10) in the SA, so that the IMA and SA have the same underlying for risk exposures (equal treatment is necessary for fallback and output floor).
No comment
No comment
We assume that the daily fair-value of commodity positions will confront smaller banks with challenges and high costs (e.g. through higher fees for daily market data supply.)
This seems reasonable.
IMA banks should be able to model this reasonably without further guidance.
We assume that the question relates to specific FX impairments for non-financial assets at acquisition costs and not to general credit-risk induced impairments.
In general, a modelling right should be available to both IMA and also SA banks; modelling will lead to more appropriate risk metrics.

The impact on capital requirements depends on the other FX risk positioning.
The proposed approach seems pragmatic.
Dr. Christian Drefahl
G