120. CSRBB captures a combination of two elements: (a) The chang es of the “market credit spread” …

CSRBB captures a combination of two elements:

• (a) The chang es of the “market credit spread” or “market price of credit risk” ( distinct from the idiosyncratic credit spread)¹⁴ representing the credit risk premium required by market participants for a given credit quality;¹⁵
• (b) The changes of the “market liquidity spread” representing the liquidity premium that sparks market appetite for investments and presence of willing buyers and sellers;

¹⁴ Idiosyncratic credit spread reflects the specific credit risk associated with the credit quality of the individual borrower (which will also reflect assessments of risks arising from the sector and geographical location of the borrower) and the specifics of the credit instrument (e.g., whether a bond or a derivative).

¹⁵ For instance, the additional yield that a debt instrument issued by an AA-rated entity must produce over a risk-free alternative.

1. Overview

1.1 References

1.2 Identified Requirements

1.3 Related Standards

2. Identified Requirements

3. Related Standards

• EBA - Published by the European Banking Authority at https://www.eba.europa.eu/