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

Moving Regulatory Reporting up a Gear with AI

The aim of derivatives regulatory reporting is to improve transparency so regulators can monitor market activity and identify emerging risks. Although reporting rules and subsequent updates have resulted in improvements, they haven’t achieved fully consistent outcomes, leading to implementation and...

ISDA Publishes FpML Version 5.14

ISDA has published a new version of its Financial products Markup Language (FpML), a widely used open-source standard for the electronic dealing and processing of derivatives transactions. The latest iteration – version 5.14 – incorporates several key modifications and updates...

Accounting for Tokenized Assets as Collateral

The use of tokenized assets as collateral for derivatives and securities financing transactions (SFTs) is emerging as a significant development in global capital markets. Financial institutions are increasingly evaluating tokenized representations of money market funds, government securities and other high-quality...