Version in force , Inserted +2,388 −0§
Amended by Regulation (EU) 2019/876 32019R0876 on EUR-Lex (external, EUR-Lex)
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Explanation, written by a model and checked against the cited text
Article 325bk is a newly added provision defining the stress scenario risk measure for a non-modellable risk factor as the loss incurred on positions subject to foreign exchange or commodity risk when an extreme future shock scenario is applied to that factor.
It requires institutions to develop extreme shock scenarios for non-modellable risk factors to the satisfaction of competent authorities, and directs EBA to draft regulatory technical standards covering how such scenarios are developed and applied, a regulatory fallback scenario per broad sub-category from Article 325bd's Table 2, conditions for calculating the measure across more than one risk factor, and aggregation methods, with submission to the Commission by 28 September 2020.
Cited: Art. 325bk, v2 (external, EUR-Lex)
v1 is the previous version, v2 this one.
Text from EUR-Lex
Inserted in this version 02013R0575-20190627
Article 325bk Calculation of stress scenario risk measure 1. The stress scenario risk measure of a given non-modellable risk factor means the loss that is incurred in all trading book positions or non-trading book positions that are subject to foreign exchange or commodity risk of the portfolio which includes that non-modellable risk factor when an extreme scenario of future shock is applied to that risk factor. 2. Institutions shall develop appropriate extreme scenarios of future shock for all non-modellable risk factors, to the satisfaction of their competent authorities. 3. EBA shall develop draft regulatory technical standards to specify: (a) how institutions are to develop extreme scenarios of future shock applicable to non-modellable risk factors and how they are to apply those extreme scenarios of future shock to those risk factors; (b) a regulatory extreme scenario of future shock for each broad sub-category of risk factors listed in Table 2 of Article 325bd, which institutions may use when they are unable to develop an extreme scenario of future shock in accordance with point (a) of this subparagraph, or which competent authorities may require that institution apply if those authorities are not satisfied with the extreme scenario of future shock developed by the institution; (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 included in their trading book positions and non-trading book positions that are subject to foreign exchange risk or commodity risk. In developing those draft regulatory technical standards, EBA shall take into consideration the requirement that the level of own funds requirements for market risk of a non-modellable risk factor as set out in this Article shall be as high as the level of own funds requirements for market risk that would have been calculated under this Chapter if that risk factor were modellable. EBA shall submit those draft regulatory technical standards to the Commission by 28 September 2020. Power 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.