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Document 32021R0424
Commission Delegated Regulation (EU) 2021/424 of 17 December 2019 amending Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to the alternative standardised approach for market risk (Text with EEA relevance)
Commission Delegated Regulation (EU) 2021/424 of 17 December 2019 amending Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to the alternative standardised approach for market risk (Text with EEA relevance)
Commission Delegated Regulation (EU) 2021/424 of 17 December 2019 amending Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to the alternative standardised approach for market risk (Text with EEA relevance)
C/2019/9068
OJ L 84, 11.3.2021, p. 1–15
(BG, ES, CS, DA, DE, ET, EL, EN, FR, GA, HR, IT, LV, LT, HU, MT, NL, PL, PT, RO, SK, SL, FI, SV)
In force
11.3.2021 |
EN |
Official Journal of the European Union |
L 84/1 |
COMMISSION DELEGATED REGULATION (EU) 2021/424
of 17 December 2019
amending Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to the alternative standardised approach for market risk
(Text with EEA relevance)
THE EUROPEAN COMMISSION,
Having regard to the Treaty on the Functioning of the European Union,
Having regard to Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (1), and in particular Article 461a thereof:
(1) |
In 2019, the Basel Committee on Banking Supervision (BCBS) published the revised ‘Minimum capital requirements for market risk’, which addressed the weaknesses in the prudential treatment of banks’ trading book activities (2). |
(2) |
The alternative standardised approach laid down in Chapter 1a of Title IV of Part Three of Regulation (EU) No 575/2013 currently lacks technical specifications to be fully operational. Those specifications should be aligned with the BCBS Minimum capital requirements for market risk. |
(3) |
The BCBS Minimum capital requirements for market risk specify the calculation of the own funds requirements for curvature risk for instruments with optionality. That calculation comprises a number of steps, including how to apply shocks to risk factors and how to aggregate curvature risk across risk factors. For foreign exchange risk factors, the calculation needs to be adjusted to avoid double-counting curvature risks. Without that adjustment, such double-counting may occur because in the BCBS Minimum capital requirements for market risk, foreign exchange risk factors are expressed using the reporting currency of an institution. |
(4) |
Instruments without optionality should only be subject to own funds requirements for delta risk for the non-exotic underlying(s) of the instruments, but not for curvature risk. The BCBS Minimum capital requirements for market risk, however, gives institutions the option to subject all instruments, including those without optionality, to own funds requirements for curvature risk. That option can be helpful for institutions that manage and hedge positions with and without optionality together. However, to avoid that that option is used primarily for the purpose of reducing own funds requirements, an institution wishing to exercise that option should be required to notify its intention to use that option to its competent authority, which should have the possibility to refuse the use of that option. The same should apply where an institution no longer wishes to use that option. |
(5) |
In relation to the treatment of positions in collective investment undertakings (CIUs), the look-through approach is the most accurate approach for the calculation of own funds requirements for positions in CIUs because that approach relies on the actual composition of the CIUs instead of a proxy composition. The availability of the look-through approach, however, requires certain strict conditions to be met. Institutions should therefore be allowed to use other approaches, provided they are aware of the content of the mandate of the CIU and can obtain daily price quotes. In that situation, institutions can set up a hypothetical portfolio to compute the own funds requirements for market risk of the position in the CIU. These institutions should also have the possibility to calculate the own funds requirements for credit valuation adjustment risk of derivative positions included in the CIU using a simplified approach where there is not sufficient information to calculate the own funds requirements for credit valuation adjustment risk based on the existing approaches. That possibility should be aligned with the simplified approach applicable to derivative positions included in the CIUs allocated to the non-trading book. Because of the number of assumptions that institutions need to make when using that approach, its use should be subject to the approval of the competent authority at the level of each individual CIU. |
(6) |
In addition, institutions should have the option to treat a CIU position that tracks an index as a direct position in that index for the purposes of calculating the own funds requirements for market risk. That approach should be allowed where the difference in annualised return between the CIU and the index it tracks remains below 1 % over a 12-month period. Where less than 12 months of data are available, institutions should seek the permission from their competent authority to use that approach. |
(7) |
In all other instances, positions in CIUs should be assigned to the non-trading book and treated accordingly for the purposes of calculating the own funds requirements of those positions. |
(8) |
The BCBS Minimum capital requirements for market risk propose a ‘base currency’ approach as an additional approach to determine the own funds requirements for delta and curvature risks of foreign exchange risk factors. In line with that approach, institutions should, when calculating the own funds requirements for market risk, be able to choose another currency than their reporting currency to express the foreign exchange risk factors. That approach should be allowed where the institution meets a number of conditions related to the institution’s management of foreign exchange risk and should be subject to supervisory approval. |
(9) |
The BCBS Minimum capital requirements for market risk specify the risk weights applicable to the sensitivities of the risk-free rate risk factors, of inflation and to cross currency basis risk factors, to the credit spread risk factors for non-securitisations of bucket 11 in Table 4 of Article 325ah of Regulation (EU) No 575/2013, of covered bonds risk factors issued by credit institutions in third countries, of credit spread risk factors for securitisations included in the ACTP, of credit spread risk factors for securitisations not included in the ACTP, of equity risk factors and of commodity risk factors. The risk weights applicable to the sensitivities of those risk factors in the alternative standardised approach should be aligned with the BCBS Minimum capital requirements for market risk. |
(10) |
The BCBS Minimum capital requirements for market risk specify the intra-bucket correlations for covered bonds risk factors issued by credit institutions in third countries, the intra-bucket correlations for equity risk, and the correlations across buckets for equity risk. The correlations applicable in the alternative standardised approach should be aligned with the BCBS Minimum capital requirements for market risk. |
(11) |
Regulation (EU) No 575/2013 should therefore be amended accordingly. |
(12) |
Institutions should be given sufficient time to implement the changes to the alternative standardised approach for market risk introduced by this Delegated Regulation. The application of this Delegated Regulation should therefore be deferred, |
HAS ADOPTED THIS REGULATION:
Article 1
Regulation (EU) No 575/2013 is amended as follows:
(1) |
Article 325e is amended as follows:
|
(2) |
Article 325g is replaced by the following: ‘Article 325g Own funds requirements for curvature risk 1. Institutions shall perform the calculations laid down in paragraph 2 for each risk factor of the instruments subject to the own funds requirement for curvature risk, except for the risk factors referred to in paragraph 3. For a given risk factor, institutions shall perform those calculations on a net basis across all the positions of the instruments subject to the own funds requirement for curvature risk that contain that risk factor. 2. For a given risk factor k included in one or more instruments referred to in paragraph 1, institutions shall calculate the upward net curvature risk position of that risk factor () and the downward net curvature risk position of that risk factor () as follows:
where:
3. By way of derogation from paragraph 2, for curves of risk factors that belong to the general interest rate risk (GIRR), credit spread risk (CSR) and commodity risk classes, institutions shall perform the calculations laid down in paragraph 6 at the level of the entire curve instead of at the level of each risk factor that belongs to the curve. For the purposes of the calculation referred to in paragraph 2, where xk is a curve of risk factors allocated to the GIRR, CSR and commodity risk classes, sik shall be the sum of the delta sensitivities to the risk factor of the curve across all tenors of the curve. 4. In order to determine a bucket-level own funds requirement for curvature risk, institutions shall aggregate, in accordance with the following formula the upward and downward net curvature risk positions, calculated in accordance with paragraph 2, of all the risk factors assigned to that bucket in accordance with Subsection 1 of Section 3:
where:
; ; ;
5. By way of derogation from paragraph 4, for the bucket-level own funds requirements for curvature risk of bucket 18 of Article 325ah, of bucket 18 of Article 325ak, of bucket 25 of Article 325am and of bucket 11 of Article 325ap the following formula shall be used:
6. Institutions shall calculate the risk-class own funds requirements for curvature risk (RCCR) by aggregating all the bucket-level own funds requirements for curvature risk within a given risk class as follows:
where:
; ;
7. The own funds requirement for curvature risk shall be the sum of the risk class own funds requirements for curvature risk calculated in accordance with paragraph 6 across all risk classes to which at least one risk factor of the instruments referred to in paragraph 1 belongs.’; |
(3) |
in Article 325h(2), point (c) is replaced by the following:
|
(4) |
Articles 325i and 325j are replaced by the following: ‘Article 325i Treatment of index instruments and other multi-underlying instruments 1. Institutions shall use a look-through approach for index and other multi-underlying instruments in accordance with the following:
2. By way of derogation from point (a) of paragraph 1, institutions may calculate a single sensitivity to a position in a listed equity or credit index for the purposes of calculating the own funds requirements for delta and curvature risks provided the listed equity or credit index meets the conditions set out in paragraph 3. In that case, institutions shall assign the single sensitivity to the relevant bucket as set out in Subsection 1 of Section 6 as follows:
3. Institutions may use the approach set out in paragraph 2 for instruments referencing a listed equity or credit index where all of the following conditions are met:
4. An institution shall use, consistently over time, only the approach set out in paragraph 1 or the approach set out in paragraph 2 for all the instruments that reference a listed equity or credit index that meets the conditions set out in paragraph 3. An institution shall require prior permission from the competent authority before switching from one approach to another. 5. For an index or other multi-underlying instrument, the sensitivity inputs for the calculation of delta and curvature risks shall be consistent, irrespective of the approaches used for that instrument. 6. Index or multi-underlying instruments which bear other residual risks as referred to in Article 325u(5) shall be subject to the residual risk add-on referred to in Section 4. Article 325j Treatment of collective investment undertakings 1. An institution shall calculate the own funds requirements for market risk of a position in a CIU using one of the following approaches:
An institution that uses one of the approaches set out in point (b) shall apply the own funds requirement for the default risk set out in Section 5 of this Chapter and the residual risk add-on set out in Section 4 of this Chapter where the mandate of the CIU implies that some exposures in the CIU shall be subject to those own funds requirements. An institution that uses the approach set out in point (ii) of point (b) may calculate the own funds requirements for counterparty credit risk and own funds requirements for credit valuation adjustment risk of derivative positions of the CIU, using the simplified approach set out in paragraph 3 of Article 132a. 2. By way of derogation from paragraph 1, where an institution has a position in a CIU that tracks an index benchmark so that the annualised return difference between the CIU and the tracked index benchmark over the last 12 months is below 1 % in absolute terms, ignoring fees and commissions, the institution may treat that position as a position in the tracked index benchmark. An institution shall verify compliance with that condition when the institution enters into the position and, after that, at least annually. However, where data for the last 12 months are not fully available, an institution may, subject to permission from the institution’s competent authority, use an annualised return difference from a period shorter than 12 months. 3. An institution may use a combination of the approaches referred to in points (a), (b) and (c) of paragraph 1 for its positions in CIUs. However, an institution shall use only one of those approaches for all the positions in the same CIU. 4. For the purposes of point (b) of paragraph 1, an institution shall carry out the calculations under the following provisions:
The own funds requirements for all positions in the same CIU for which the calculations referred to in the first subparagraph are used shall be calculated on a stand-alone basis as a separate portfolio using the approach set out in this Chapter. 5. An institution may use the approaches referred to in point (a) or (b) of paragraph 1 only where the CIU meets all the conditions set out in Article 132(3) and point (a) of Article 132(4).’; |
(5) |
Article 325q is amended as follows:
|
(6) |
in Article 325ae, paragraphs 1 and 2 are replaced by the following: ‘1. For currencies not included in the most liquid currency sub-category as referred to in point (b) Article 325bd(7), the risk weights of the sensitivities to the risk-free rate risk factors shall be the following: Table 3
2. Institutions shall apply a risk weight of 1,6 % to all sensitivities of inflation and to cross currency basis risk factors.’; |
(7) |
in paragraph 1 of Article 325ah, Table 4 is replaced by the following: ‘Table 4
|
(8) |
in Article 325aj, Table 5 is replaced by the following: ‘Table 5
|
(9) |
in Article 325ak, Table 6 is replaced by the following: ‘Table 6
|
(10) |
in paragraph 1 of Article 325am, Table 7 is replaced by the following: ‘Table 7
|
(11) |
in paragraph 1 of Article 325ap, Table 8 is replaced by the following: ‘Table 8
|
(12) |
Article 325aq is amended as follows
|
(13) |
Articles 325ar and 325as are replaced by the following: ‘Article 325ar Correlations across buckets for equity risk The correlation parameter γbc shall apply to the aggregation of sensitivities between different buckets. It shall be set in relation to the buckets of Table 8 in Article 325ap as follows:
Article 325as Risk weights for commodity risk Risk weights for sensitivities to commodity risk factors shall be the following: Table 9
|
(14) |
in Article 325av, paragraph 1 is replaced by the following: ‘1. A risk weight of 15 % shall be applied to all sensitivities of foreign exchange risk factors.’; |
(15) |
in paragraph 3 of Article 325ax, Table 11 is replaced by the following: ‘Table 11
|
Article 2
This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.
It shall apply from 30 September 2021.
This Regulation shall be binding in its entirety and directly applicable in all Member States.
Done at Brussels, 17 December 2019.
For the Commission
The President
Ursula VON DER LEYEN
(1) OJ L 176, 27.6.2013, p. 1.
(2) Basel Committee on Banking Supervision, Minimum capital requirements for market risk. This publication is available on the website of the Bank for International Settlements (www.bis.org).