EBA · 2021_6272 Rejected question

Aggregation of risk-class specific own funds requirements for delta, vega and curvature risks

Name: Aggregation of risk-class specific own funds requirements for delta, vega and curvature risks: EBA Q&A — EU Financial Regulatory Q&A
Creator: European Banking Authority
License: https://creativecommons.org/licenses/by/4.0/

Regulation: Regulation (EU) No 575/2013 (CRR)
Article: Article 325h
Topic: Market risk
Submitted by: Consultancy firm
Submitted: 2021-11-10

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Question

Should own funds requirement for Sensitivities Based Approach be the sum of GIRR, CSR, Equity and Forex requirement arising from the scenario with the highest total requirement value? or result from the scenario with the highest total requirement at the individual asset level class? And how to calculate the requirement in Article 325h(4)?

Background

According to Article 325h - paragraph 3: Institutions shall calculate the sum of the delta, vega and curvature risk-class specific own funds requirements for each scenario to determine three scenario-specific, own funds requirements; - paragraph 4: The own funds requirement under the sensitivities-based method shall be the highest of the three scenario-specific own funds requirements referred to in paragraph 3. It is unclear whether the three scenario-specific own funds requirements in paragraph 3 refer to the aggregate value of all risk classes in the scenario or to the individual risk class. For example, we have that the high correlation scenario is the one with the highest value equal to 150. However for the forex risk class the scenario with the highest value is the low correlation one which has a value of 30 and, instead in the high correlation we have 20. It is unclear whether the own final funds requirement be 150 or 160 (150 - 20 (FX in high correlation) + 30 (FX in low correlation).

No answer published yet.

Original source: European Banking Authority, Q&A ID 2021_6272

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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