Regulatory and Implementing Technical Standards on benchmarking portfolios

Status: Adopted and published in the Official Journal

Internal approaches used for the calculation of own funds requirements for market and credit risk are subject to an annual assessment by competent authorities. The EBA assists competent authorities in their assessment by providing a report including benchmarks which help to identify any material differences in RWA outcomes. The legal framework for the above is provided by Directive 2013/36/EU (CRD) and in particular Article 78 thereof as well as by the following technical standards provided by the EBA: a) Regulatory technical standards (RTS) laying down standards for competent authorities as regards the assessment of the internal approaches adopted by institutions and the procedures for sharing of those assessments between competent authorities; b) Implementing technical standards (ITS) specifying the benchmarking portfolios and reporting instructions for institutions to be applied in the annual benchmarking exercises.

Consultation on ITS on Supervisory Benchmarking framework for 2019

Summary
18/12/2017

The European Banking Authority (EBA) launched today a consultation to amend the Commission Implementing Regulation on benchmarking of internal models to adjust the benchmarking portfolios and reporting requirements in view of the benchmarking exercise the EBA will carry out in 2019. The proposed changes reduce uncertainties in the credit risk portfolios, thus aiming at fostering a common and coherent interpretation and implementation of the reporting requirements across EU institutions. The consultation will run until 31 January 2018.
 
Based on the feedback received from the recent interactions with institutions, the proposals included in this Consultation Paper aim at enhancing the market risk portfolios, as well as at simplifying some hypothetical trades. Minor changes to the reporting templates and instructions have been included to keep the portfolios up to date and the reported data relevant for the 2019 assessment.
 
These revised benchmarking portfolios and reporting requirements are expected to be applicable for the submission of initial market valuation data in Q3 2018 and of other market and credit risk data in 2019 (i.e. with reference date 31 December 2018).

Consultation process

Responses 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 31 January 2018.
 
A public hearing will take place at the EBA premises on 23 January 2018 from 11:00 to 12:30 UK time. 

Legal basis and background

Article 78 of the Capital Requirements Directive (CRD) requires competent authorities to conduct an annual assessment of the quality of internal approaches used for the calculation of own funds requirements. To assist competent authorities in this assessment, the EBA calculates and distributes benchmark values against which individual institutions’ risk parameters can be compared. These benchmark values are based on data submitted by institutions as laid out in the Capital Requirements Regulation (CRR), which specifies the benchmarking portfolios, templates and definitions to be used as part of the annual benchmarking exercises.
 
Consultation Paper on draft RTS and ITS on benchmarking portfolios (EBA/CP/2014/07)

Summary
28/05/2014

The European Banking Authority (EBA) launched today a consultation on draft Implementing Technical Standards (ITS) and Regulatory Technical Standards (RTS) aimed at specifying the EU framework for the conduct of annual supervisory benchmarking of internal approaches for calculating own funds requirements for credit and market risk exposures (RWAs). The consultation runs until 19 August 2014.

These ITS and RTS follow the significant work that the EBA conducted on the comparability of capital requirements for internal ratings-based approach (IRBA) for credit risk and market internal risk models, including a series of benchmarking exercises run in 2013. This work has led to a better understanding of the drivers behind differences observed in RWAs across EU institutions. The future benchmarking exercises, as outlined in this consultation paper, will continue to play a crucial role in improving comparability of capital requirements calculated using internal approaches.

These ITS provide (i) a set of benchmark portfolios for credit and market risk based on recent EBA experiences; (ii)  templates, definitions and IT solutions that EU banks will be asked to use when reporting the results of their calculations of capital requirements.

These RTS define (i) the common general benchmarks for credit and market portfolios to be used by the competent authorities in the assessment of the quality of the internal approaches. These benchmarks aim at detecting significant differences in RWAs, as well as significant and systematic underestimation of capital requirements; (ii) the procedures for sharing the results of the assessment of internal approaches carried out by each competent authority with both the EBA and the other relevant competent authorities.

Consultation process

All contributions received will be published following the close of the consultation, unless requested otherwise.

A public hearing will take place at the EBA premises on 16 June 2014 from 14:00 to 18:00 hours UK time.

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 19 August 2014.

Legal basis and next steps

The proposed draft ITS and RTS have been developed on the basis of Art. 78 of Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms (Capital Requirements Directive - CRD).

Considering the importance of implementing a rigorous benchmarking framework, the European Commission agreed to the EBA’s request for a postponement of the deadline for the submission of the ITS and RTS from 31 December 2013 to 30 September 2014.

In the last quarter of 2014, the EBA is planning to run another benchmarking exercise for credit and market risk ahead of the adoption of these technical standards.