EBA PUBLISHES FINAL DRAFT TECHNICAL STANDARDS ON THE ALTERNATIVE STANDARDISED APPROACH FOR MARKET RISK AS PART OF ITS FRTB ROADMAP

Information

  Banks and financial intermediaries


  EBA


  Final draft RTS

On 22nd October 2021, the European Banking Authority (EBA) published its final draft Regulatory Technical Standards (RTS) on gross jump-to-default (JTD) amounts and on residual risk add-on (RRAO). These final draft RTS provide technical specifications for the implementation of these two elements of the alternative standardised approach for market risk. The draft 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 for market risk are required to compute, on top of the own funds requirements under the sensitivities-based method, own funds requirements for default risk and for residual risks.

The final draft RTS on gross JTD amounts specify key inputs needed for computing own funds requirements for default risk. Gross JTD amounts determined in accordance with these draft RTS are intended to be consistent with those determined in accordance with international standards, while employing the formulae and requirements set out in the Capital Requirements Regulation (CRR).

The draft RTS on RRAO clarify the scope of the RRAO, i.e. for which instruments the own funds requirements for residual risks should be determined. They specify a non-exhaustive list of instruments bearing residual risks, and a list of risks that, in themselves, do not constitute residual risks. These draft RTS also clarify that longevity risk, weather, natural disasters and future realised volatility should all be considered as exotic underlyings.

The final draft RTS published have been finalised after a three-month public consultation.

The module ‘REN+’ of the TigreArm suite allows for the consultation of the original version of this document.



Pubblicato il 22/10/2021

 

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