Own credit risk

Should own credit risk be considered in the Alternative Standardised Approach of the FRTB?

According to the current Regulation, para. 327 (1) of the CRR, own credit risk is not considered within the specific risk component of the standardized approach. From our perspective, the treatment of own credit risk in the Alternative Standardized Approach (ASA) of the FRTB is not yet explicitly clarified. We assume that the intention is to keep the existing approach where own credit risk is not considered in the standard approach. In our view, it makes no sense to consider own credit risk in the Alternative Standardised Approach of the FRTB. In accordance with Art. 33 (1) b) CRR, the effects of own creditworthiness are neutralized in regulatory capital. This is also the procedure for internal capital. The effects should therefore also not be considered in the market risk. In addition, from an accounting perspective, a deterioration in the economic situation of the issuing institution would (or could) result in issued liabilities hedging assets through an offsetting effect, which cannot be the objective. In consultation with the relevant JST, the institution concerned will not consider the effects of own creditworthiness in the FRTB-ASA.