1. When assessing whether an institution’s internal model is implemented with integrity as required by Article 325bi(1) of Regulation (EU) No 575/2013 in relation to the calculation of the partial expected shortfall measures referred to in Article 325bc of that Regulation, competent authorities shall:
(a)
verify whether the estimator used by the institution to estimate the expected shortfall risk measures is conceptually sound and reasonably accurate;
(b)
verify whether, when calculating partial expected shortfall measures
and
as required by Article 325bc(1) of Regulation (EU) No 575/2013, the institution identifies effective liquidity horizons of the risk factors of a given position, taking into account the maturity of the position in accordance with Article 325bd(4) of that Regulation;
(c)
verify whether, as part of the internal policies referred to in Article 325bi(1), point (e), of Regulation (EU) No 575/2013, the institution has established objective criteria that are appropriate for choosing the risk factors forming the subset of modellable risk factors referred to in Article 325bc(2), point (a), of that Regulation;
(d)
verify whether risk factors that are not part of the subset of modellable risk factors chosen by the institution in accordance with Article 325bc(2), point (a), of Regulation (EU) No 575/2013 are kept constant when computing
and
;
(e)
verify whether the techniques used to calculate
and those used to calculate
are the same, except for those deviations necessary to ensure the fulfilment of requirements set out in Article 325bc(2) to (4) of Regulation (EU) No 575/2013;
(f)
verify whether, when calculating the
, the institution uses equally weighted data in the observation period;
(g)
in relation to the identification of the stress period, verify whether the 12-month rolling windows tested to determine the stress period starts at least from 1 January 2007 as referred to in Article 325bc(2), point (c), of Regulation (EU) No 575/2013 and that the internal policies of the institution specify the frequency of update of the stress period for the calculation of the partial expected shortfall measures, and the other applicable criteria triggering its update.
For the purposes of point (e), competent authorities shall obtain an overview of the differences in the techniques employed by the institution when calculating the partial expected shortfall measures calibrated on the recent 12-month period and on the stress period, and verify whether those differences do not go beyond what is needed to achieve compliance with the requirements set out in Regulation (EU) No 575/2013.
For the purposes of point (g), competent authorities shall verify, also on the basis of past updates, whether the stress period is updated at least with a quarterly frequency and that the institution has followed any possible criteria specified in the internal policies.
