On February 29, ISDA and the Association for Financial Markets in Europe (AFME) submitted a joint response to the European Banking Authority’s (EBA) consultation on draft regulatory technical standards on the conditions for assessing the materiality of extensions and changes to the use of internal models under the Fundamental Review of the Trading Book (FRTB).
The associations highlight the importance of having qualitative and quantitative criteria in the rules that are proportionate and do not lead to unnecessary operational burdens that reduce the adoption of the internal models approach (IMA). The qualitative and quantitative criteria aim to determine whether model changes or extensions are material and require further review from the competent authorities.
The associations believe the suggested thresholds for both material model changes and extensions for changes in the subset of modellable risk factors require further review and provide recommendations for the thresholds. In addition, the suggested qualitative criteria for material model changes, particularly those related to a change to the structure of a desk or a change in the business strategy of a desk, should be placed under the additional information category. The associations also suggest the assessment and ex-ante notification period should be shortened.
Documents (1) for ISDA Responds to EBA on Changes to IMA under FRTB
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