ISDA Responds to EBA Consultation on Internal Models Benchmarking

On February 15, 2021, ISDA submitted a response to the European Banking Authority (EBA) on its consultation on the implementing technical standards for the 2022 internal models benchmarking exercise.

Article 78 of Directive 2013/36/EU (CRD IV) requires competent authorities to conduct an annual assessment of the quality of internal approaches used for the calculation of own funds requirements. To assist competent authorities in this assessment, the EBA calculates and distributes benchmark values against which individual institutions’ risk parameters can be compared. These benchmark values are based on data submitted by institutions as laid out in Commission Implementing Regulation (EU) 2016/2070, which specifies the benchmarking portfolios, templates and definitions to be used as part of the annual benchmarking exercises.

The industry appreciates the EBA’s efforts to harmonize the output of firms’ internal models. However, there is concern that the benchmarking exercise for market risk for IMA (internal model approach) banks is proposed to extend and also cover the Fundamental Review of the Trading Book alternative standardized approach (ASA). The industry appreciates that the EBA only aims to include information that is already part of the ASA calculation, but it will nevertheless be an additional burden to IMA banks.

The industry furthermore proposes that any ASA sensitivities that are reported use the industry standard common risk interchange format (SA-CRIF), as this has been widely tested and used by industry participants.

Documents (1) for ISDA Responds to EBA Consultation on Internal Models Benchmarking

Maintaining Focus on Basel III Endgame Recalibration

In its original form, the US Basel III endgame proposal would have resulted in disproportionate increases in capital for trading book activities, forcing banks to make difficult choices about their participation in certain businesses. After two-and-a-half years, a revised proposal...

IRRBB Management in EMDEs

Interest rate risk in the banking book (IRRBB) has become a growing priority for banks and regulators in emerging market and developing economies (EMDEs). As many of these countries face monetary tightening cycles and ongoing macroeconomic volatility, bank balance sheets...

Response to CPMI-IOSCO on Consultation

On February 5, ISDA and FIA responded to the Committee on Payments and Market Infrastructures (CPMI) and International Organization of Securities Commissions (IOSCO) consultation on the management of general business risks and general business losses by financial market infrastructures (FMIs)....