The Regulatory Technical Standards (RTS) on emerging markets and advanced economies provide a list of countries with an advanced economy to calculate the equity risk under the alternative standardised approach (FRTB-SA).
Final draft adopted by the EBA and submitted to the European Commission
The Regulatory Technical Standards (RTS) on emerging markets and advanced economies provide a list of countries with an advanced economy to calculate the equity risk under the alternative standardised approach (FRTB-SA).
The European Banking Authority (EBA) launched today a public consultation on its draft Regulatory Technical Standards (RTS) on the list of countries with an advanced economy for calculating the equity risk under the alternative standardised approach (FRTB-SA). These RTS are part of the phase 3 deliverables of the EBA roadmap for the new market and counterparty credit risk approaches. The consultation runs until 2 July 2021.
Institutions using the alternative standardised approach to determine own funds requirements for market risk are required to compute the equity risk stemming from their trading book positions in accordance with a prescribed set of risk factors and corresponding risk weights. To determine the appropriate risk-weight, institutions are to identify whether a risk factor refers to an advanced economy or an emerging market. Risk factors mapped to the advanced economy bucket benefit from a lower risk weight compared to those mapped to the emerging market bucket.
To ensure compliance with the international standards, the consultation paper proposes a list of advanced economies corresponding to the list provided in the Fundamental Review of the Trading Book (FRTB). In this context, the EBA seeks feedback on whether the list is comprehensive, in particular, whether there are additional EU countries where the equity risk can be considered similar to the countries’ already included in the FRTB list of advanced economies. Furthermore, the EBA seeks stakeholders’ views on sources of data and criteria that could be designed to identify advanced economies and emerging markets for the purpose of FRTB-SA equity risk own funds requirements.
Comments to this consultation can be sent to the EBA by clicking on the "send your comments" button on the consultation page. Please note that the deadline for the submission of comments is 2 July 2021. All contributions received will be published following the end of the consultation, unless requested otherwise.
The public hearing on these draft RTS will take place on 29 April 2021 from 15.30 to 18.00 CEST and will be held jointly with the public hearing on draft RTS on jump to default amounts and residual risk add-on.
These draft RTS have been developed according to Article 325ap(3) of Regulation (EU) No 575/2013 (CRR), which mandates the EBA to specify what constitutes an emerging market and to specify what constitutes an advanced economy.
The European Banking Authority (EBA) published today its final draft Regulatory Technical Standards (RTS) on the list of countries with an advanced economy for calculating the equity risk under the alternative standardised approach (FRTB-SA). These RTS are part of the phase 3 deliverables of the EBA roadmap for the new market and counterparty credit risk approaches.
Institutions using the alternative standardised approach to determine own funds requirements for market risk are required to compute the equity risk stemming from their trading book positions in accordance with a prescribed set of risk factors and corresponding risk weights. To determine the appropriate risk-weight, institutions are to identify whether a risk factor refers to an advanced economy or an emerging market. Risk factors mapped to the advanced economy bucket benefit from a lower risk weight compared to those mapped to the emerging market bucket.
While not specifying the underlying criteria to draw it, the FRTB standards provide a list of advanced economies that leaves out some EU countries. The EBA, accordingly, analysed an extensive sample of equity names to assess whether equity names related to economies included in the FRTB list are less volatile than those relating to the excluded EU countries. The results show that this is not the case.
On the basis of the results obtained, and considering that the EU has a single market, the final draft RTS complement the FRTB list of advanced economies by including all member states and all countries belonging to the European Economic Area (EEA).
These draft RTS have been developed according to Article 325ap(3) of Regulation (EU) No 575/2013 (CRR), which mandates the EBA to specify what constitutes an emerging market and to specify what constitutes an advanced economy.
The European Banking Authority (EBA) launched today a public consultation on its draft Regulatory Technical Standards (RTS) on the list of countries with an advanced economy for calculating the equity risk under the alternative standardised approach (FRTB-SA). These RTS are part of the phase 3 deliverables of the EBA roadmap for the new market and counterparty credit risk approaches. The consultation runs until 2 July 2021.
Institutions using the alternative standardised approach to determine own funds requirements for market risk are required to compute the equity risk stemming from their trading book positions in accordance with a prescribed set of risk factors and corresponding risk weights. To determine the appropriate risk-weight, institutions are to identify whether a risk factor refers to an advanced economy or an emerging market. Risk factors mapped to the advanced economy bucket benefit from a lower risk weight compared to those mapped to the emerging market bucket.
To ensure compliance with the international standards, the consultation paper proposes a list of advanced economies corresponding to the list provided in the Fundamental Review of the Trading Book (FRTB). In this context, the EBA seeks feedback on whether the list is comprehensive, in particular, whether there are additional EU countries where the equity risk can be considered similar to the countries’ already included in the FRTB list of advanced economies. Furthermore, the EBA seeks stakeholders’ views on sources of data and criteria that could be designed to identify advanced economies and emerging markets for the purpose of FRTB-SA equity risk own funds requirements.
Comments to this consultation can be sent to the EBA by clicking on the "send your comments" button on the consultation page. Please note that the deadline for the submission of comments is 2 July 2021. All contributions received will be published following the end of the consultation, unless requested otherwise.
The public hearing on these draft RTS will take place on 29 April 2021 from 15.30 to 18.00 CEST and will be held jointly with the public hearing on draft RTS on jump to default amounts and residual risk add-on.
These draft RTS have been developed according to Article 325ap(3) of Regulation (EU) No 575/2013 (CRR), which mandates the EBA to specify what constitutes an emerging market and to specify what constitutes an advanced economy.