EBA · 2013_213 Archive

Additional value adjustments

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
34, 105
Topic
Market risk
Submitted by
Credit institution
Submitted
2013-09-05
Answer provided by
ESAs (EBA, ESMA, EIOPA)
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Question

According to the Article 34 of Regulation (EU) No 575/2013 (CRR), institutions shall apply the requirements of Article 105 to all their assets measured at fair value when calculating the amount of their own funds and shall deduct from Common Equity Tier 1 capital the amount of any additional value adjustments necessary. Does the provision “to all their assets measured at fair value” mean that this Article concerns all trading book positions or this Article concerns all trading and banking book positions?

Background

According current binding regulations additional value adjustments concerns only trading book positions.

Answer

While Article 105 of Regulation (EU) No 575/2013 (CRR) refers to the prudent valuation standards being applicable to all trading book positions, Article 34 of CRR requires that institutions shall apply the standards of Article 105 to all assets measured at fair value when calculating the amount of their own funds. Therefore the prudent valuation requirements specified in Article 105 apply to fair valued positions for the purposes of Article 34 regardless of whether they are held in the trading book or banking book. [i] [i] N.B This treatment is in line with paragraph 24 of the final revisions to the Basel II framework as published on 13.07.2009, whereby prudent valuation guidelines shall apply to "positions that are accounted for at fair value, whether they are in the trading book or in the banking book."

Original source: European Banking Authority, Q&A ID 2013_213

This Q&A is published by European Banking Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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