Tuesday December 19 2017

News Source: Fund Regulation

Focus: Other

Type: General

Country: European Union




On 18th December 2017, the European Banking Authority (EBA) launched 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 31st  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.

This new set of market risk benchmarking portfolios has the following three-layer structure:

  • The first layer consists of a set of financial instruments for which IMV (“Initial Market Valuation”) shall be computed.
  • The second layer consists of individual portfolios defined by combining different instruments, for the purpose of assessing the effect of grouping instruments as well as the effect of partial or full hedging.
  • The third layer consists of the definition of the aggregated portfolios, for the purpose of assessing the diversification effects and the implied capital requirements.

The main changes related to credit risk are the following:

  • Separation of on-balance sheet and off-balance sheet exposures;
  • Replacement of RWA* and RWA** with confidence intervals;
  • Separation of specialised lending exposures and other credit risk exposures;
  • Making consistent use of the economic sector classification for portfolios covering exposures to sovereigns and institutions;
  • Refinement of the split by collateral type.

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 31st  December 2018).

Please click on the above link for more information.