6.2 Information on risk measurement, assessment and aggregation

On risk measurement, assessment and aggregation methodologies used within ICAAP, competent authorities should ensure that they receive from institutions the following:

• a. general description of key features of quantification/measurement methodologies and models, including metrics, assumptions and parameters used (e.g. confidence intervals, holding periods etc.) for all risk categories and sub-categories that are used for the approval of methodologies and models by the management body of the institution;
• b. specification of the actual data used, including an explanation of how the data used reflects the scope of group entities covered by ICAAP, including the length of the time series;
• c. description of the main differences between quantification/measurement methodologies and models used for ICAAP purposes and those used for the calculation of the minimum own funds requirements for risks covered by Regulation (EU) No 575/2013 (in case an institution is using advanced models approved by the competent authorities). Such description should be provided on a risk-by-risk basis and include inter alia information on the different use of Basel I transitional floors (Article 500 of Regulation (EU) No 575/2013), different assumptions regarding risk parameters, confidence intervals etc.;
• d. description of the approach to the aggregation of the internal capital estimates for the entities and the risk categories covered, including the approach to intra-risk and inter-risk diversification benefits and/or concentrations where considered by the institution’s methodology.

6.2.2 Operational documentation

On evidencing the implementation of the ICAAP risk measurement, assessment and aggregation methodologies, competent authorities should ensure that they receive from institutions the following:

• a. internal capital estimates to cover all risk categories and sub-categories, broken down by risk category and sub-category covered by ICAAP. Where institutions assert that certain risk categories or sub-categories covered by ICAAP are better covered by means of qualitative mitigating measures rather than by allocating internal capital, this should be explained accordingly;
• b. the results of the calculation of internal capital estimates as specified above for all material risk categories and sub-categories covered by ICAAP on a risk-by-risk basis. Where certain risk sub-categories are identified as material but the calculation methodologies applied have not enabled the calculation of an internal capital estimate at the level of granularity required, and, for that reason, such estimates have been incorporated as part of internal capital estimate for a respective risk category, institutions should explain how such sub-categories have actually been included in the calculations (e.g. some risk sub-category has been identified as material, but the institution is not able to provide an internal capital estimate for such risk and instead includes coverage of this risk within the capital estimate for the main risk category; in that case, the competent authority should ensure that the institution explains how this risk has been captured under the main risk category);
• c. in addition to the risk-by-risk information specified above, the results of the aggregation of the internal capital estimates for entities and risk categories, including for the effects of intra-risk and inter-risk diversification benefits and/or concentrations, where these aspects are being taken into account by the methodology applied.