280. Competent authorities should assess the reliability of the ICAAP calculations related to …

Competent authorities should assess the reliability of the ICAAP calculations related to paragraph 279, points (a) and (b), by assessing whether they are sufficiently:

• a. consistent: the quantified risks should be commensurate with the business model, composition of the portfolio and trading strategy of the investment firm;
• b. granular: the ICAAP methodologies should allow the calculations to be broken down at least by risk category²³ , where possible broken-down risk-by-risk, rather than presenting a single (economic capital) calculation covering all risks;
• c. credible: the calculations/methodologies used should demonstrably cover the risks they are looking to address and should be based on the investment firm’s knowledge and experience, or, where applicable, on appropriate models and prudent assumptions;
• d. understandable: the underlying drivers of the calculations/methodologies should be clearly specified. A ‘black box’ calculation should not be acceptable; and
• e. comparable: competent authorities should consider the ICAAP’s risk measurement methodologies, adjusting, or requiring the investment firm to adjust them to facilitate comparability with peers and supervisory benchmark estimations.

²³ Risk categories cover the risks associated to an orderly wind-down, risk-to-clients, risk-to-markets, risk-to-firms and other risks further specified by means of the delegated regulation adopted in accordance with Article 40(6) of Directive (EU) 2019/2034.

1. Overview

1.1 References

1.2 Identified Requirements

1.3 Related Standards

2. Identified Requirements

3. Related Standards

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