Changes from report parliamentary committee draft to plenary report

Added(a) paragraph 1 is replaced by the following:

Added‘1. The alternative internal model approach may be used by an institution to calculate its own funds requirements for market risk provided that the institution meets all the requirements set out in this Chapter.’;

Added(c) paragraph 2, first subparagraph, is amended as follows:

Added(i) points (c) and (d) are replaced by the following:

Added‘(c) the trading desks have met the back-testing requirements referred to in Article 325bf(3);

Added(d) the trading desks have met the profit and loss attribution (‘P&L attribution’) requirements referred to in Article 325bg;’;

Added(ii) the following point (g) is added:

Added‘(g) no positions in CIUs that meet the condition set out in Article 104(7), point (b), have been assigned to the trading desks.’;

Added(c) paragraph 3 is replaced by the following:

Added‘3. Institutions that have received the permission to use the alternative internal model approach shall also meet the reporting requirement set out in Article 325(3).’;

Added(ca) in paragraph 8, point (b) is replaced by the following:

Added‘(b) the assessment methodology under which competent authorities verify an institution's compliance with the requirements set out in this Chapter.’;

Added(d) paragraph 9, first subparagraph, is amended as follows:

Added(i) point (b) is replaced by the following:

Added‘(b) to limit the calculation of the add-on to that resulting from overshootings under the back-testing of hypothetical changes as referred to in Article 325bf(6);’;

Added(ii) the following point (c) is added:

Added‘(c) to exclude the overshootings evidenced by the back-testing of hypothetical or actual changes from the calculation of the add-on as referred to in Article 325bf(6);’;

Added(152) in Article 325ba, the following paragraph 3 is added:

Added‘3. An institution using an alternative internal model shall calculate the total own funds requirements for market risk for all trading book positions and all non-trading book positions generating foreign exchange or commodity risks in accordance with the following formula:

Addedwhere:

AddedAIMA = the sum of the own funds requirements referred in to paragraphs 1 and 2;

Added= the additional own funds requirement referred in to Article 325bg(2);

Added= the own funds requirements for market risk as calculated under the alternative standardised approach referred to in Article 325(1), point (a), for the portfolio of all trading book positions and all non-trading book positions generating foreign exchange or commodity risks;

Added= the own funds requirements for market risk as calculated under the alternative standardised approach referred to in Article 325(1), point (a), for the portfolio of trading book positions and non-trading book positions generating foreign exchange or commodity risks for which the institution uses the alternative standardised approach to calculate the own funds requirements for market risk;

Added= the own funds requirements for market risk as calculated under the alternative standardised approach referred to in Article 325(1), point (a), for the portfolio of trading book positions and non-trading book positions generating foreign exchange or commodity risks for which the institution used the approach referred to in Article 325(1), point (b) to calculate the own funds requirements for market risk;

Added(153) in Article 325bc, the following paragraph 6 is added:

Added‘6. EBA shall develop draft regulatory technical standards to specify the criteria for the use of data inputs in the risk-measurement model referred to in this Article, including criteria on data accuracy and criteria on the calibration of the data inputs where market data is insufficient.

AddedEBA shall submit those draft regulatory technical standards to the Commission by [9 months after the entry in force of this Regulation].

AddedPower 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.’

Added(154) Article 325be is amended as follows:

Added(a) in paragraph 1, the following subparagraph is added:

Added‘For the purposes of the assessment referred to in paragraph 1, competent authorities may allow institutions to use market data provided by third-party vendors.’;

Added(b) the following paragraph 1a is inserted:

Added‘1a. Competent authorities may require an institution to consider not modellable a risk factor that has been assessed as modellable by the institution in accordance with paragraph 1, where the data inputs used to determine the scenarios of future shocks applied to the risk factor do not meet, to the satisfaction of the competent authorities, the requirements referred to in Article 325bc(6).’;

Added(c) the following paragraph 2a is inserted:

Added‘2a. In extraordinary circumstances, occurring during periods of significant reduction in certain trading activities across financial markets, competent authorities may allow all institutions using the approach set out in this Chapter to consider as modellable some risk factors that have been assessed as not modellable by these institutions in accordance with paragraph 1, provided that the following conditions are fulfilled:

Added(a) the risk factors subject to the treatment correspond to the trading activities which are significantly reduced across financial markets;

Added(b) the treatment is applied temporarily, and not for more than six months within one financial year;

Added(c) the treatment referred to in the first subparagraph does not significantly reduce the total own funds requirements for market risk of the institutions applying it;

Added(d) competent authorities immediately notify EBA of any decision to allow institutions to apply the approach set out in this Chapter to consider as modellable some risk factors that have been assessed as non-modellable, as well as of the trading activities concerned, and substantiate that decision.’;

Added(d) paragraph 3 is replaced by the following:

Added‘3. EBA shall develop draft regulatory technical standards to specify the criteria to assess the modellability of risk factors in accordance with paragraph 1, including where market data provided by third-party vendors are used, and the frequency of that assessment.

AddedEBA shall submit those draft regulatory technical standards to the Commission by [OP please insert date = 9 months after the date of entry into force of this Regulation].

AddedPower 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.’;

Added(155) Article 325bf is amended as follows:

Added(a) paragraph 6 is amended as follows:

Added(i) in the first subparagraph, the introductory sentence is replaced by the following:

Added‘The multiplication factor (mc) shall be equal to at least the sum of 1,5 and an add-on determined in accordance with Table 3. For the portfolio referred to in paragraph 5, the add-on shall be calculated on the basis of the number of overshootings that occurred over the most recent 250 business days as evidenced by the institution's back-testing of the value-at-risk number calculated in accordance with point (a) of this subparagraph. The calculation of the add-on shall be subject to the following requirements:’;

Added(ii) the last subparagraph is replaced by the following:

Added‘In extraordinary circumstances, competent authorities may permit an institution to:

Added(a) limit the calculation of the add-on to that resulting from overshootings under the back-testing of hypothetical changes where the number of overshootings under the back-testing of actual changes does not result from deficiencies in the institution’s alternative internal model;

Added(b) exclude the overshootings evidenced by the back-testing of hypothetical or actual changes from the calculation of the add-on where those overshootings do not result from deficiencies in the institution’s alternative internal model.’;

Added(iii) the following subparagraph is added:

Added‘For the purposes of the first subparagraph, competent authorities may increase the value of mc above the sum referred to in that subparagraph, where an institution’s alternative internal model shows deficiencies to appropriately measure the own funds requirements for market risk.’;

Added(b) paragraph 8 is replaced by the following:

Added‘8. By way of derogation from paragraphs 2 and 6 of this Article, competent authorities may permit an institution not to count an overshooting where a one-day change in the value of its portfolio that exceeds the related value-at-risk number calculated by that institution's internal model is attributable to a non-modellable risk factor.’

Added(c) the following paragraph 10 is added:

Added’10. EBA shall develop draft regulatory technical standards to specify the conditions and the criteria according to which an institution may be allowed not to count an overshooting where the one-day change in the value of its portfolio that exceeds the related value-at-risk number calculated by that institution's internal model is attributable to a non-modellable risk factor.

AddedEBA shall submit those draft regulatory technical standards to the Commission by [OP please insert date = 18 months after the date of entry into force of this Regulation].

AddedPower 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.