EBA · 2021_5747 Rejected question

Supervisory delta for commodities with negative prices

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
279a, para. 1
Topic
Credit risk
Submitted by
Credit institution
Submitted
2021-02-18
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Question

Article 279a (1), (a) of the CRR establishes the formula to be used for calculating the supervisory delta of options mapped to all risk categories except for the interest rate category. Can such formula be made compatible with market conditions in which commodities may have negative prices?

Background

The formula for the supervisory delta as per Article 279a (1)(a) CRR cannot be applied in case of negative prices for commodities. In accordance with the provision of Article 279a(3) and due to the existence of negative interest rates, the supervisory delta formula has been specified differently in the final draft of the RTS on the Standardised Approach for Counterparty Credit Risk published by the EBA on 18 December 2019.
No answer published yet.

Original source: European Banking Authority, Q&A ID 2021_5747

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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