Consultation paper on guidelines to the Incremental Default and Migration Risk Charge (IRC)

These two consultation papers are in response to the amendments to the CRD by Directive 2010/76/EU relating to Stressed VaR and to the Incremental Risk Capital Charge (IRC) in the trading book.  

Such amendments to the Capital Requirements Directive request the EBA to monitor the range of practices in these areas and and to draw up guidelines in order to ensure convergence of supervisory practices and to secure a level playing field across Europe.
 

Providing guidance on the Stressed VaR and IRC modelling to credit institutions using the internal model method ("IMM") for the calculation of the required capital for market risk in the trading book is crucial. Our guidance will be fundamental for identifying and addressing weaknesses in the regulatory capital framework and in the risk management of financial institutions as well as for reducing their reliance on cyclical VaR-based capital estimates and for ultimately contributing to a more robust financial system.
 

The EBA submits its initial views for a public consultation which starts today and runs until 15 January 2012.

Comments received will be published on the EBA's website unless respondents request otherwise.

Please send your comments to the following email address:CP49@eba.europa.eu (IRC) and CP48@eba.europa.eu (Stressed VaR).
 

The consultation is open to all interested parties, including supervised institutions and other market participants. A public hearing will take place on 13 December 2011 at the EBA's premises in London, from 10:00 to 13:00 in order to allow all interested parties to share their views with the EBA. To register, please fill in the registration form and send it before 10 December.