Consultation on Regulatory Technical Standards on profit and loss attribution requirements, risk factor modellability assessment, and the treatment of FX and commodity risk in the banking book
- Consultation
- 14 DECEMBER 2023 - 14 MARCH 2024
- EBA/CP/2023/41
The European Banking Authority (EBA) today launched for consultation amendments to its Regulatory Technical Standards (RTS) on the fundamental review of the trading book (FRTB), and to its RTS on the standardised approach for counterparty credit risk (SA-CCR). Both RTS are part of the roadmap on the Banking Package and aim to align the existing RTS with the Capital Requirements Regulation (CRR3). The consultation runs until 14 March 2024.
The CRR3 introduces a number of changes to the FRTB and includes mandates for the EBA to amend the existing RTS to make them fit with the new Level 1 text. The RTS on the FRTB relate to the treatment of foreign-exchange and commodity risk in the banking book, the profit and loss attribution test and the risk factor modellability assessment. The revisions mostly aim to align these RTS with the CRR3 and ensure stability in the applicable regulatory framework.
The CRR3 has amended the EBA mandate to specify the formula to calculate the supervisory delta of interest rate options compatible with negative interest rates by adding the formula for commodity options compatible with negative commodity prices. These amendments extend the existing approach for negative interest rates to the case of negative commodity prices, which some commodities experienced during the COVID period.
Consultation process
Comments to both consultation papers can be sent to the EBA by clicking on the "send your comments" button on the consultation pages. Comments to the recast RTS on FRTB and amending RTS on SA-CCR are expected to be submitted separately. Please note that the deadline for the submission of comments is 14 March 2024. All received contributions will be published at the end of the consultations, unless requested otherwise.
A public hearing on the draft ITSs will take place via online meeting on 21 February 2024 from 16:00 to 17:00 CET. Please register for the hearing here by 19 February 16:00 CET. The dial-in details will be communicated to those who have registered for the meeting.
All contributions received will be published following the end of the consultation, unless requested otherwise.
Legal basis and background
The draft RTS on the FRTB have been developed according to Article 325(9), 325be(3) and 325bg(4) of Regulation (EU) No 575/2013 (CRR), as amended by the CRR3, which mandates the EBA to specify:
- how institutions are to calculate the own funds requirements for market risk for non-trading book positions that are subject to foreign-exchange risk or commodity risk;
- how institutions are to assess the risk factors’ modellability;
- technical details relating to the profit and loss attribution tests.
The draft RTS on SA-CCR have been developed according to Article 277(5) and 279a(3) of Regulation (EU) No 575/2013 (CRR), as amended by the CRR3, which mandates the EBA to specify:
- the method for identifying transactions with only one material risk driver;
- the method for identifying transactions with more than one material risk driver and for identifying the most material of those risk drivers;
- the formulas to calculate the supervisory delta of call and put options mapped to the interest rate or commodity risk categories compatible with negative interest rates or commodity prices, and the supervisory volatility suitable for those formulas;
- the method for determining whether a transaction is a long or short position in the primary risk driver or in the most material risk driver in the given risk category.
The EBA roadmap also outlines the EBA’s intentions and plan of action to ensure a smooth implementation of the new approaches across the EU. In particular, it reflects the prioritisation of the EBA’s work in four phases, which is broadly in line with the deadlines included in the CRR3, starting with the implementation of the essential parts of the framework.
Responses
The form is now closed.
Received responses to the EBA
Documents
Consultation paper on amendments to the FRTB RTS
(467.92 KB - PDF)