Guidelines on the Incremental Default and Migration Risk Charge (IRC) (EBA/GL/2012/03)

Linji Gwida tal-ABE dwar l-Imposta fuq Riskji Inkrimentali ta’ Inadempjenza u Migrazzjoni (IRC) ................................................................................ 1 Titolu I - Suġġett, Kamp ta‟ applikazzjoni u Definizzjonijiet ........................................... 4

1. Suġġett ...................................................................................................... 4 2. Ambitu istituzzjonali u livell ta‟ applikazzjoni ................................................... 4 3. Definizzjonijiet ............................................................................................ 4 Titolu II – Rekwiżiti rigward l-immudellar tal-IRC tal-istituzzjonijiet .......................... 4

A. Ambitu materjali ta’ applikazzjoni .......................................................................................... 4 4. Pożizzjonijiet soġġetti għall-kalkolu tal-IRC ..................................................... 4 5. Pożizzjonijiet li mhumiex soġġetti għall-kalkolu tal-IRC .................................... 6 6. Pożizzjonijiet ta‟ ekwità u derivati ta‟ ekwità ................................................... 6 7. Pożizzjonijiet fid-dejn proprju tal-istituzzjoni ................................................... 6 8. Użu parzjali permanenti ............................................................................... 7 B. Immudellar Individwali ................................................................................................................. 7 9. Standard ta‟ solidità komparabbli mal-IRB ...................................................... 7 10. Kriterji kwalitattivi ..................................................................................... 7 11. Sors ta‟ klassifikazzjonijiet .......................................................................... 7 12. Sors ta‟ PDs u ta‟ LGDs............................................................................... 8 C. Interdipendenza ................................................................................................................................. 8 13. Korrelazzjonijiet bejn avvenimenti ta‟ inadempjenza u ta‟ migrazzjoni .............. 8 14. Suppożizzjonijiet kopula ............................................................................. 9 15. Fatturi ta‟ riskju sistemiku .......................................................................... 9 16. Il-konċentrazzjoni tal-Portafoll .................................................................... 9 17. Matriċijiet ta‟ migrazzjoni .......................................................................... 10 18. Livell kostanti ta‟ suppożizzjoni tar-riskju matul l-orizzont ta‟ kapital ta‟ sena .. 11 19. Hedging ................................................................................................. 12 D. Valutazzjoni tal-Qligħ u t-Telf (P&L) ................................................................................... 12 20. L-Impatt tal-bidla fil-klassifikazzjoni fuq il-prezzijiet tas-suq ......................... 12 21. Il-Komputazzjoni tal-Qligħ u t-Telf ............................................................. 13 E. Orizzont ta’ likwidità ...................................................................................................................... 14 22. Il-livell li fih għandhom ikunu ddefiniti l-orizzonti ta‟ likwidità ........................ 14 23. Kriterji ewlenin għad-determinazzjoni tal-orizzont rilevanti ta‟ likwidità .......... 14 24. Il-monitoraġġ tal-orizzonti ta‟ likwidità – indikaturi ewlenin tal-ħtieġa ta‟ reviżjoni ....................................................................................................... 15 F. Kwistjonijiet ġenerali .................................................................................................................... 16 25. Validazzjoni ............................................................................................ 16 26. Test tal-Użu ............................................................................................ 17 27. Dokumentazzjoni ..................................................................................... 17 28. Approċċi tal-IRC ibbażati fuq parametri differenti ......................................... 17 29. Frekwenza tal-kalkolu .............................................................................. 18 Titolu III – Dispożizzjonijiet Finali u Implimentazzjoni ................................................... 18

30. Data tal-applikazzjoni............................................................................... 18 Titolu I - Suġġett, Kamp ta‟ applikazzjoni u Definizzjonijiet

III. EBA Guidelines on the IRC ......................................................................................... 7 Title I -Subject matter, Scope and Definitions ..................................................................... 9

1. Subject matter ............................................................................................ 9 2. Scope and level of application ....................................................................... 9 3. Definitions .................................................................................................. 9 Title II - Requirements regarding institutions‟ IRC modelling ........................................ 9

A. Scope of Application ........................................................................................................................ 9 4. Positions subject to calculation of the IRC ....................................................... 9 5. Positions not subject to calculation of IRC ..................................................... 10 6. Positions in equity and equity derivatives ...................................................... 11 7. Positions in the institution‟s own debt .......................................................... 11 8. Permanent partial use ................................................................................ 12 B. Individual Modelling ...................................................................................................................... 12 9. Soundness standard comparable to IRB ....................................................... 12 10. Qualitative criteria ................................................................................... 12 11. Source of ratings ..................................................................................... 12 12. Source of PDs and LGDs ........................................................................... 13 C. Interdependence .............................................................................................................................. 13 13. Correlations between default and migration events ...................................... 13 14. Copula assumptions ................................................................................. 14 15. Systemic risk factors ................................................................................ 14 16. Portfolio concentration ............................................................................. 14 17. Migration matrices ................................................................................... 15 18. Constant level of risk assumption over the one-year capital horizon ............... 15 19. Hedging ................................................................................................. 16 D. P&L valuation .................................................................................................................................... 17 20. Impact of rating change on market prices ................................................... 17 21. Computation of P&L ................................................................................. 18 E. Liquidity horizon .............................................................................................................................. 18 22. The level at which to define liquidity horizons .............................................. 18 23. Key criteriafor determining the relevant liquidity horizon .............................. 19 24. Monitoring liquidity horizons - key indicators of the need for review ............... 20 F. General matters ................................................................................................................................ 20 25. Validation ............................................................................................... 20 26. Use Test ................................................................................................. 21 27. Documentation ........................................................................................ 21 28. IRC approaches based on different parameters ............................................ 22 29. Frequency of calculation ........................................................................... 22 Title III-Final Provisions and Implementation .................................................................... 23

30. Date of application ................................................................................... 23

8 Title I - Subject matter, Scope and Definitions