On March 14, 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 (RTS) relating to specific elements of the standardized approach for counterparty credit risk (SA-CCR).
In the response, the associations highlight their concerns about the fragmentation of regulatory requirements relating to SA-CCR across jurisdictions and believe it is crucial to perform a holistic review of the SA-CCR framework at the international level to improve SA-CCR risk sensitivity and minimize the risk of market fragmentation.
The draft RTS provides options to calculate the supervisory delta of commodities. However, there are instances where negative values of the instrument or risk factors underlying an option contract can occur in other asset classes as well. The associations recommend an extension to the application of the λ shift to all asset classes. Furthermore, the associations propose the use of actual front office (FO) deltas or deltas derived from FO prices, such as in the Fundamental Review of the Trading Book. They also highlight that US agencies have proposed an extension of the λ shift to all asset classes, not only commodities. The associations recommend the EBA aligns with the US agencies and extends the scope to all asset classes.
Documents (1) for ISDA Responds to EBA on Standardized Approach for Counterparty Credit Risk
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