The European Banking Authority (EBA) launched a consultation on draft Regulatory Technical Standards (RTS) on the capitalisation of non-modellable risk factors (NMRFs) for institutions using the new Internal Model Approach (IMA) under the FRTB (Fundamental Review of the Trading Book). These draft RTS are one of the key deliverables included in the roadmap for the new market and counterparty credit risk approaches published on 27 June 2019. The consultation runs until 4 September 2020.
The draft RTS specify all technical details that are essential for determining the own funds requirements related to non-modellable risks. In particular, they set how institutions are to determine the stress scenario risk measure corresponding to a non-modellable risk factor.
Given that the capitalisation of non-modellable risk factors is a key component of the own funds requirement for market risk, the EBA also launched a data collection exercise in June 2019 to fine-tune and calibrate the methodologies that were proposed in the Discussion Paper on ‘Implementation in the EU of the revised market risk and counterparty credit risk frameworks’ published on 18 December 2017. Thus, the proposed draft RTS are the result of an iterative process where the views of market participants have been sought several times.
Comments to this consultation can be sent to the EBA by clicking on the "send your comments" button on the consultation page. Please note that the deadline for the submission of comments is 4 September 2020.
A public hearing will then take place via conference call on 3 July 2020 from 16:30 CET. The dial in details will be communicated in due course.
All contributions received will be published following the close of the consultation, unless requested otherwise.
These draft RTS have been developed according to Article 325bk(3) of REGULATION (EU) 2019/876 of the European Parliament and of the Council of 20 May 2019 amending Regulation (EU) No 575/2013.
Article 325 bk(3) of that Regulation requires the EBA to develop draft RTS to specify (a) how institutions are to develop extreme scenarios of future shock applicable to non-modellable risk factors; (b) a regulatory extreme scenario which institutions may use when they are unable to develop an extreme scenario of future shock in accordance with point (a) or which competent authorities may require that institution apply; (c) the circumstances under which institutions may calculate a stress scenario risk measure for more than one non-modellable risk factor; (d) how institutions are to aggregate the stress scenario risk measures of all non-modellable risk factors.