+Title 6 Assessing risks to capital
---+6.1 General considerations
------+145. Competent authorities should assess and score the risks to capital that have been identified …
------+146. The purpose of this title is to provide common methodologies to be considered for assessing …
------+147. This title provides competent authorities with guidance for the assessment of risks and costs …
------+148. Paragraph 147, points (a) to (c) are applicable to the assessment of investment firms …
------+149. The title also identifies a set of sub-categories within each risk category above, which need …
------+150. The decision on materiality is based on the most recent available data and can be complemented …
------+151. Competent authorities should also assess other risks that are identified as material to a …
------+152. The above elements should also be taken into account by competent authorities when they are …
------+153. For Risk-to-Client, Risk-to-Market, Risk-to-Firm, as well as for fixed overheads requirement …
------+154. In their implementation of the methodologies specified in this title, competent authorities …
------+155. When performing their assessments, competent authorities should use all available information …
------+156. For each risk category, competent authorities should assess and reflect in the risk score: a. …
------+157. Competent authorities should reflect the outcome of the assessment of each risk category in a …
---+6.2 Assessment of orderly wind-down of the investment firm
------+158. Competent authorities should identify and assess the process to orderly wind-down the …
------+159. There are many scenarios under which an investment firm may wind-down. While performing their …
------+160. To set up adequate scenarios pursuant to paragraph 159, competent authorities should consider …
------+161. Where a recovery plan is available, if appropriate, competent authorities should rely on the …
------+162. Competent authorities should determine the adequate time horizon for the investment firm to …
------+163. To determine the expected time-horizon of orderly wind-down, competent authorities should take …
------+164. Competent authorities should determine the various stakeholders that could be impacted by the …
------+165. Competent authorities should perform an assessment of the impact of a wind-down on the …
------+166. Competent authorities should perform an assessment of the impact of a wind-down on the markets …
------+167. Based on the analysis of the investment firm’s organisational structure and operating model …
---+6.3 Assessment of Risk-to-Client
------+168. Competent authorities should assess Risk-to-Client arising from all types of exposures …
------+169. In assessing Risk-to-Client, competent authorities should take into account the different …
------+170. Through the assessment of inherent Risk-to-Client, competent authorities should determine the …
------+171. Competent authorities should assess Risk-to-Client in both current and prospective terms.
------+172. Where relevant, competent authorities should also conduct a more granular assessment …
------+173. To determine the scope of the assessment of Risk-to-Client, competent authorities should first …
------+174. As a minimum, competent authorities should consider the following: a. the risk appetite with …
------+175. Competent authorities should perform the preliminary analysis considering the change in the …
------+176. Competent authorities should assess the risk of incurring a loss for clients due to the …
------+177. Competent authorities should focus on these sources of inherent risk, where relevant: a. …
------+178. Competent authorities should assess the risk of losing client money and having to compensate …
------+179. Competent authorities should assess whether client money is held according to national law …
------+180. Competent authorities should focus on these sources of inherent risk, where relevant: a. …
------+181. Competent authorities should assess the risk of incurring a loss for clients and having to …
------+182. Competent authorities should focus on these sources of inherent risk where relevant: a. reuse …
------+183. Competent authorities should assess the risk of operational loss while handling client orders. …
------+184. Competent authorities should focus on these sources of inherent risk, where relevant: a. …
------+185. To achieve a comprehensive understanding of the investment firm’s Risk-to-Client profile …
------+186. Following the above assessment, competent authorities should form a view on the investment …
---+6.4 Assessment of Risk-to-Market
------+187. Competent authorities should assess Risk-to-Market arising from all types of exposures: for …
------+188. In assessing Risk-to-Market, competent authorities should take into account the volume, nature …
------+189. Through the assessment of inherent market risk, competent authorities should determine the …
------+190. To determine the scope of the assessment of risk-to-market, competent authorities should first …
------+191. As a minimum, competent authorities should consider: a. the investment firm’s market …
------+192. In their initial assessments, competent authorities should also consider significant changes …
------+193. Competent authorities should analyse the nature of the investment firm’s market risk exposures …
------+194. Competent authorities should analyse market risk exposures by relevant asset classes and/or …
------+195. While analysing market risk activities, competent authorities should also consider the …
------+196. Where appropriate, competent authorities should assess distressed and/or illiquid positions …
------+197. For those investment firms using internal approaches to calculate their regulatory own funds …
------+198. Where appropriate, competent authorities should also consider the internal risk measures of …
------+199. When analysing inherent market risk, competent authorities should consider ‘point-in-time’ …
------+200. Competent authorities should analyse the historic profitability, including volatility of …
------+201. While assessing profitability, competent authorities should pay specific attention to the main …
------+202. For those asset classes and/or exposures generating abnormal profits or losses, competent …
------+203. Competent authorities should form a view on the degree of market concentration risk to which …
------+204. When evaluating possible concentrations, competent authorities should pay special attention to …
------+205. Competent authorities should form a view on the prudent valuation framework of the investment …
------+206. Competent authorities should assess whether the investment firm’s trading book positions are …
------+207. Competent authorities should assess whether investment firms have robust prudent valuation …
------+208. Competent authorities should assess whether: a. the governance arrangements, processes and …
------+209. Competent authorities should assess the risk relating to the underestimation of own funds …
------+210. To achieve a comprehensive understanding of the investment firm’s market risk profile …
------+211. Following the above assessment, competent authorities should form a view on the investment …
------+212. Competent authorities should consider all these factors in parallel and not in isolation and …
---+6.5 Assessment of Risk-to-Firm
------+213. Competent authorities should assess Risk-to-Firm arising from different risk factors such as …
------+214. In assessing Risk-to-Firm, competent authorities should take into account the volume, nature …
------+215. Through the assessment of inherent Risk-to-Firm, competent authorities should determine the …
------+216. Competent authorities should assess Risk-to-Firm in both current and prospective terms.
------+217. Where relevant, competent authorities should also conduct a more granular assessment …
------+218. To determine the scope of the assessment of Risk-to-Firm, competent authorities should first …
------+219. As a minimum, competent authorities should consider the following: a. the business model and …
------+220. Competent authorities should perform the preliminary analysis considering the change in the …
------+221. Competent authorities should form a view on the degree of operational risk related to trading …
------+222. Competent authorities should focus on these sources of inherent risk, where relevant: a. …
------+223. Competent authorities should form a view on the degree of concentration risk to which the …
------+224. Competent authorities should conduct this assessment considering different categories of …
------+225. Competent authorities should pay particular attention to hidden sources of concentration risk …
------+226. For groups, competent authorities should consider the concentration risk that can result from …
------+227. Competent authorities should assess the trading counterparty default risk faced by investment …
------+228. For this assessment, competent authorities should focus on the following sources of inherent …
------+229. Competent authorities should form a view on the risks incurred by the investment firm’s due to …
------+230. Competent authorities should focus on assets whose value has been estimated through models and …
------+231. Credit risk may arise from granting loans to allow a client to carry out a transaction, direct …
------+232. Competent authorities should focus on these sources of inherent risk if the relevant data is …
------+233. Competent authorities should form a view on the degree of risk of impairment or depreciation …
------+234. Competent authorities should focus on these sources of inherent risk where relevant: a. …
------+235. Competent authorities should form a view on the risks incurred by the investment firm’s due to …
------+236. Competent authorities should focus on the nature of the financial instruments held by the …
------+237. Competent authorities should form a view on the risks incurred by the investment firm’s …
------+238. Competent authorities should focus on the risk resulting from a structural gap between assets …
------+239. To achieve a comprehensive understanding of the investment firm’s Risk-to-Firm profile …
------+240. Following the above assessment, competent authorities should form a view on the investment …
------+241. Competent authorities should consider all these factors in parallel and not in isolation and …
---+6.6 Assessment of other risks
------+242. Competent authorities should assess the importance of other risks to investment firm’s …
------+243. Through the assessment of inherent risks not covered by Pillar 1 own funds requirements …
------+244. Competent authorities should assess risks not covered by Pillar 1 own funds requirements in …
------+245. Where relevant, competent authorities should also conduct an assessment of other risks than …
------+246. To determine the scope of the assessment of risks not covered by Pillar 1 own funds …
------+247. As a minimum, competent authorities should consider the following: a. the business model and …
------+248. Competent authorities should perform the preliminary analysis considering the change in the …
------+249. Competent authorities should assess the interest rate risk arising from non-trading book …
------+250. Competent authorities should assess how changes in interest rates can have an adverse impact …
------+251. In their quantitative assessment, competent authorities should consider the results of the …
------+252. Competent authorities should assess operational risks not covered by minimum own funds …
------+253. Competent authorities should consider the following sources of inherent risk and, where …
------+254. As part of all SREP assessments, competent authorities should form a view on the degree of ICT …
------+255. Competent authorities should form a view on the degree of conduct risk related to investment …
------+256. Competent authorities should focus on the following sources of inherent conduct risk where …
------+257. Competent authorities should form a view on regulatory, legal, and fiscal risks arising from …
------+258. Competent authorities should focus on these sources of inherent regulatory, legal, and fiscal …
------+259. Competent authorities should assess the risk relating to models used for business purposes …
------+260. Having regard to the specificities of the investment firm, while performing the assessment of …
------+261. Based on quantitative and qualitative criteria, competent authorities should form a view of …
------+262. Where appropriate, the assessment of systemic risk may be performed in an aggregate manner for …
------+263. To achieve a comprehensive understanding of the investment firm’s risk profile regarding risks …
------+264. Following the above assessment, competent authorities should form a view on the investment …
------+265. Competent authorities should consider all these factors in parallel and not in isolation and …

Title 6 Assessing risks to capital

Title 6 Assessing risks to capital

1. Overview

,
6.1 General considerations

6.1 General considerations
6.2 Assessment of orderly wind-down of the investment firm

6.2 Assessment of orderly wind-down of the investment firm
6.3 Assessment of Risk-to-Client

6.3.1 General considerations
6.4 Assessment of Risk-to-Market

6.4.1 General considerations
6.5 Assessment of Risk-to-Firm

6.5.1 General considerations
6.6 Assessment of other risks

6.6.1 General considerations

1.1 References

1.2 Identified Requirements

1.3 Related Standards

2. Identified Requirements

Requirements

3. Related Standards

Standards
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