Changes from plenary report to adopted text

RemovedEBA shall submit those draft regulatory technical standards referred to in paragraphs 3 and 4 to the Commission by [OP please insert date = 24 months after the date of entry into force of that Regulation].

RemovedPower is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

Removed4. EBA shall develop draft regulatory technical standards to specify:

Removed(a) the conditions for assessing the materiality of extensions and changes to the use of the standardised approach as referred to in Article 383(3);

Removed(b) the assessment methodology under which competent authorities shall verify an institution's compliance with the requirements set out in Articles 383 and 383a.

RemovedEBA shall submit those draft regulatory technical standards to the Commission 36 months [after the entry into force of that Regulation].

RemovedPower is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

Removed1. Institutions shall apply the delta and vega risk factors described in Articles 383c to 383h, and the process set out in paragraphs 2 to 8, to calculate the own funds requirements for delta and vega risks.

Removed2. For each risk class referred to in Article 383(2), the sensitivity of the aggregate CVAs and the sensitivity of all the positions in eligible hedges falling within the scope of the own funds requirements for delta or vega risks to each of the applicable delta or vega risk factors included in that risk class shall be calculated by using the corresponding formulas laid down in Articles 383i and 383j. Where the value of an instrument depends on several risk factors, the sensitivity shall be determined separately for each risk factor.

RemovedFor the calculation of the vega risk sensitivities of the aggregate CVAs, sensitivities both to volatilities used in the exposure model to simulate risk factors and to volatilities used to reprice option transactions in the portfolio with the counterparty shall be included.

RemovedBy way of derogation from paragraph 1, subject to the permission of the competent authorities, an institution may use alternative definitions of delta and vega risk sensitivities in the calculation of the own funds requirements of a trading book position under this Chapter, provided that the institution meets all the following conditions:

Removed(a) those alternative definitions are used for internal risk management purposes and for the reporting of profits and losses to senior management by an independent risk control unit within the institution;

Removed(b) the institution demonstrates that those alternative definitions are more appropriate for capturing the sensitivities of the position than the formulas set out in Articles 383i and 383j, and that the resulting sensitivities do not materially differ from those formulas.

Removed3. Where an eligible hedge is an index instrument, institutions shall calculate the sensitivities of that eligible hedge to all the relevant risk factors by applying the shift of one of the relevant risk factor to each of the index constituents.

Removed4. An institution may introduce additional risk classes to the ones referred to in Article 383(2) that correspond to qualified index instruments. For the purposes of delta risks, an index instrument shall be considered to be qualified where it meets the conditions set out in Article 325i▌. For vega risks, all index instruments shall be considered qualified.

RemovedAn institution shall calculate delta and vega sensitivities to a qualified index risk factor as a single sensitivity to the underlying qualified index. Where 75% of the constituents of a qualified index are mapped to the same sector as set out in Articles 383o, 383r and 383t, the institution shall map the qualified index to that same sector. Otherwise, the institution shall map the sensitivity to the applicable qualified index bucket.

Removed5. The weighted sensitivities of the aggregate CVA and of the market value of all eligible hedges to each risk factor shall be calculated by multiplying the respective net sensitivities by the corresponding risk weight, in accordance with the following formulae:

Removedwhere:

Removed= the index that denotes the risk factor k;

Removed= the risk weight applicable to the risk factor k;

Removed= the weighted sensitivity of the aggregate CVA to risk factor k;

Removed= the net sensitivity of the aggregate CVA to risk factor k;

Removed= the weighted sensitivity of the market value of all the eligible hedges in the CVA portfolio to risk factor k;

Removed= the net sensitivity of the market value of all the eligible hedges in the CVA portfolio to risk factor k.

Removed6. Institutions shall calculated the net weighted sensitivity of the CVA portfolio to risk factor k in accordance with the following formula:

Removed7. The net weighted sensitivities within the same bucket shall be aggregated in accordance with the following formula, using the corresponding correlations for weighted sensitivities within the same bucket set out in Articles 383l, 383s and 383p giving rise to the bucket-specific sensitivity :

Removedwhere:

Removed= the bucket-specific sensitivity of bucket b;

Removed= the corresponding intra-bucket correlation parameters;

Removed= the hedging disallowance parameter equal to 0.01;

Removed= the net weighted sensitivities.

Removed8. The bucket-specific sensitivity shall be calculated in accordance with paragraphs 5, 6 and 7 for each bucket within a risk class. Once the bucket-specific sensitivity has been calculated for all buckets, weighted sensitivities to all risk factors across buckets shall be aggregated in accordance with the following formula, using the corresponding correlations for weighted sensitivities in different buckets set out in Articles 383l, 383n, 383q, 383s, 383u and 383w giving rise to the risk-class specific own funds requirements for delta or vega risk:

Removedwhere:

Removed= a multiplier factor which is equal to 1; competent authorities may increase the value of where the institution’s regulatory CVA model shows deficiencies to appropriately measure the own funds requirements for CVA risk;

Removed= the bucket-specific sensitivity of bucket b;

Removed= the correlation parameter between buckets b and c;

Removedfor all risk factors in bucket b;

Removedfor all risk factors in bucket c.

Removed1. For the interest rate delta risk factors, including inflation rate risk, there shall be one bucket per currency, with each bucket containing different types of risk factors.

RemovedThe interest rate delta risk factors that are applicable to interest-rate sensitive instruments in the CVA portfolio shall be the risk-free rates per currency concerned and per each of the following maturities: 1 year, 2 years, 5 years, 10 years and 30 years.

RemovedThe interest rate delta risk factors applicable to inflation-rate sensitive instruments in the CVA portfolio shall be the inflation rates per currency concerned and per each of the following maturities: 1 year, 2 years, 5 years, 10 years and 30 years.

Removed2. The currencies for which an institution shall apply the interest rate delta risk factors in accordance with paragraph 1 shall be USD, EUR, GBP, AUD, CAD, SEK, JPY and the institution’s reporting currency.

Removed3. For currencies not specified in paragraph 2, the interest rate delta risk factors shall be the absolute change of the inflation rate and the parallel shift of the entire risk-free curve for a given currency.

Removed4. Institutions shall obtain the risk-free rates per currency from money market instruments held in their trading book that have the lowest credit risk, including overnight index swaps.

Removed5. Where institutions cannot apply the approach referred to in paragraph 4, the risk-free rates shall be based on one or more market-implied swap curves used by the institutions to mark positions to market, such as the interbank offered rate swap curves.

RemovedWhere the data on market-implied swap curves described in the first subparagraph of this paragraph are insufficient, the risk-free rates may be derived from the most appropriate sovereign bond curve for a given currency.

Removed1. The foreign exchange delta risk factors to be applied by institutions to instruments in the CVA portfolio sensitive to foreign exchange spot rates shall be the spot foreign exchange rates between the currency in which an instrument is denominated and the institution's reporting currency or the institution's base currency where the institution is using a base currency in accordance with Article 325q(7). There shall be one bucket per currency pair, containing a single risk factor and a single net sensitivity.

Removed2. The foreign exchange vega risk factors to be applied by institutions to instruments in the CVA portfolio sensitive to foreign exchange volatility shall be the implied volatilities of foreign exchange rates between the currency pairs referred to in paragraph 1. There shall be one bucket for all currencies and maturities, containing all foreign exchange vega risk factors and a single net sensitivity.

Removed3. Institutions shall not be required to distinguish between onshore and offshore variants of a currency for foreign exchange delta and vega risk factors.

Removed1. The counterparty credit spread delta risk factor applicable to counterparty credit spread sensitive instruments in the CVA portfolio shall be the credit spreads of individual counterparties and reference names and qualified indices for the following maturities: 0,5 years, 1 year, 3 years, 5 years and 10 years.

Removed▌

Removed2a. The counterparty credit spread risk class is not subject to vega risk own funds requirements.

Removed1. The reference credit spread delta risk factor applicable to reference credit spread sensitive instruments in the CVA portfolio shall be the credit spreads of all maturities for all reference names within a bucket. There shall be one net sensitivity computed for each bucket.

Removed2. The reference credit spread vega risk factor applicable to instruments in the CVA portolio sensitive to reference credit spread volatility shall be the volatilities of the credit spreads of all tenors for all reference names within a bucket. There shall be one net sensitivity computed for each bucket.

Removed1. The buckets for all equity risk factors shall be the buckets referred to in Article 383s.

Removed2. The equity delta risk factors to be applied by institutions to instruments in the CVA portfolio sensitive to equity spot prices shall be the spot prices of all equities mapped to the same bucket referred to in paragraph 1. There shall be one net sensitivity computed for each bucket.

Removed3. The equity vega risk factors to be applied by institutions to instruments in the CVA portfolio sensitive to equity volatility shall be the implied volatilities of all the equities mapped to the same bucket referred to in paragraph 1. There shall be one net sensitivity computed for each bucket.

Removed1. The buckets for all commodity risk factors shall be the sectorial buckets referred to in Article 383v.

Removed2. The commodity delta risk factors to be applied by institutions to instruments in the CVA portfolio sensitive to commodity spot prices shall be the spot prices of all commodities mapped to the same sectorial bucket referred to in paragraph 1. There shall be one net sensitivity computed for each sectorial bucket.

Removed3. The commodity vega risk factors to be applied by institutions to instruments in the CVA portfolio sensitive to commodity price volatility shall be the implied volatilities of all the commodities mapped to the same sectorial bucket referred to in paragraph 1. There shall be one net sensitivity computed for each sectorial bucket.