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Flexible format disclosure
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EU (a)
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Article 455(c) CRR
Description of the procedures and systems implemented for the assurance of tradability of the positions included in the trading book in order to comply with the requirements of Article 104.
Description of the methodology used to ensure that the policies and procedures implemented for the overall management of the trading book are appropriate.
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EU (b)
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Article 455(c) CRR
For exposures from the trading and the non-trading book that are measured at fair value in accordance with the applicable accounting framework and that have their exposure value adjusted in accordance with Part Two, Title I, Chapter 2, Article 34 and Part Three, Title I, Chapter 3, Article 105 of the CRR (as well as the Commission Delegated Regulation (EU) No 2016/101), institutions shall describe systems and controls to ensure that the valuation estimates are prudent and reliable. These disclosures shall be provided as part of the market risk disclosures for exposures from the trading book.
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Point (i) of Article 455(a) CRR
(A) Institutions using VaR models and SVaR models must disclose the following information:
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(a)
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Point (i) of Article 455 (a) and Article 455 (b) CRR
Description of activities and risks covered by VaR and SVaR models, specifying how they are distributed in portfolios/sub-portfolios for which the competent authority has granted permission.
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(b)
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Article 455(b) CRR
Description of the scope of application of the VaR and SVaR models for which the competent authority has granted permission, including which entities in the group use these models and how the models represent all the models used at the group level, as well as the percentage of own funds requirements covered by the models or if the same models of VaR/SVaR are used for all entities with market risk exposure
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Point (i) of Article 455(a) CRR
Characteristics of the models used, including:
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(c)
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General description of regulatory VaR and SVaR models
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(d)
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Discussion of the main differences, if any, between the model used for management purposes and the model used for regulatory purposes (10 day 99%) for VaR and SVaR models.
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(e)
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For VaR models:
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(i)
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Data updating frequency;
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(ii)
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Length of the data period that is used to calibrate the model. Describe the weighting scheme that is used (if any);
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(iii)
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How the institutions determines the 10-day holding period (for example, does it scale up a 1-day VaR by the square root of 10, or does it directly model the 10-day VaR?);
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(iv)
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Aggregation approach, which is the method for aggregating the specific and general risk (i.e. do the institutions calculate the specific charge as a stand-alone charge by using a different method than the one used to calculate the general risk or do the institutions use a single model that diversifies general and specific risk?);
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(v)
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Valuation approach (full revaluation or use of approximations);
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(vi)
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Whether, when simulating potential movements in risk factors, absolute or relative returns (or a mixed approach) are used (i.e. proportional change in prices or rates or absolute change in prices or rates).
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(f)
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For SVaR models, specify:
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(i)
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How the 10-day holding period is determined. For example, does the institution scale up a 1-day VaR by the square root of 10, or does it directly model the 10-day VaR? If the approach is the same as for the VaR models, the institutions may confirm this and refer to disclosure (e) (iii) above;
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(ii)
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The stress period chosen by the institution and the rationale for this choice;
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(iii)
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Valuation approach (full revaluation or use of approximations).
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(g)
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Point (iii) of Article 455(a) CRR
Description of stress testing applied to the modelling parameters (main scenarios developed to capture the characteristics of the portfolios to which the VaR and SVaR models apply at the group level).
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(h)
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Point (iv) of Article 455(a) CRR
Description of the approach used for backtesting/validating the accuracy and internal consistency of data and parameters used for the internal models and modelling processes.
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Point (ii) of Article 455(a) CRR
(B) Institutions using internal models to measure the own funds requirements for the incremental default and migration risk (IRC) must disclose the following information:
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(a)
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Point (ii) of Article 455 (a) and Article 455 (b) CRR
Description of risks covered by the IRC models, specifying how they are distributed in portfolios/sub-portfolios for which the competent authority has granted permission.
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(b)
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Article 455(b) CRR
Description of the scope of application of the IRC model for which the competent authority has granted permission, including which entities in the group use these models and how the models represent all the models used at the group level, the percentage of own funds requirements covered by the models /or if the same models of IRC is used for all entities with market risk exposure
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(c)
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Point (ii) of Article 455(a) CRR
General description of the methodology used for internal models for incremental default and migration risk, including:
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(i)
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Information about the overall modelling approach (notably, the use of spread-based models or transition matrix-based models);
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(ii)
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Information on the calibration of the transition matrix;
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(iii)
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Information about correlation assumptions;
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(d)
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Approach used to determine liquidity horizons;
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(e)
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Methodology used to achieve a capital assessment that is consistent with the required soundness standard;
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(f)
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Approach used in the validation of the models.
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(g)
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Point (iii) of Article 455(a) CRR
Description of stress testing applied to the modelling parameters (main scenarios developed to capture the characteristics of the portfolios to which the IRC models apply at the group level).
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(h)
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Point (iv) of Article 455(a) CRR
Description of the approach used for backtesting/validating the accuracy and internal consistency of data and parameters used for the IRC internal models and modelling processes.
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Point (ii) of Article 455(a) CRR
(C) Institutions using internal models to measure own funds requirements for correlation trading portfolio (comprehensive risk measure) must disclosure the following information:
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(a)
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Point (ii) of Article 455 (a) and Article 455 (b) CRR
Description of risks covered by the comprehensive risk measure models, specifying how they are distributed in portfolios/sub-portfolios for which the competent authority has granted permission.
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(b)
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Article 455(b) CRR
Description of the scope of application of the comprehensive risk measure models for which the competent authority has granted permission, including which entities in the group use these models and how the models represent all the models used at the group level, including the percentage of own funds requirements covered by the models /or if the same models of IRC is used for all entities with market risk exposure
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(c)
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Point (ii) of Article 455(a) CRR
General description of the methodology used for correlation trading, including:
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(i)
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Information about the overall modelling approach (choice of model correlation between default/migrations and spread: (i) separate but correlated stochastic processes driving migration/default and spread movement; (ii) spread changes driving migration/default; or (iii) default/migrations driving spread changes);
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(ii)
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Information used to calibrate the parameters of the base correlation: LGD pricing of the tranches (constant or stochastic);
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(iii)
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Information on the choice of whether to age positions (profits and losses based on the simulated market movement in the model calculated based on the time to expiry of each position at the end of the 1-year capital horizon or using their time to expiry at the calculation date);
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(d)
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Approach used to determine liquidity horizons.
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(e)
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Methodology used to achieve a capital assessment that is consistent with the required soundness standard.
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(f)
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Approach used in the validation of the models.
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(g)
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Point (iii) of Article 455(a) CRR
Description of stress testing applied to the modelling parameters (main scenarios developed to capture the characteristics of the portfolios to which the comprehensive risk measure models apply at the group level).
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(h)
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Point (iv) of Article 455(a) CRR
Description of the approach used for backtesting/validating the accuracy and internal consistency of data and parameters used for the comprehensive risk measure internal models and modelling processes.
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(i)
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Point (f) of Article 455 CRR
Information on weighted average liquidity horizon for each subportfolio covered by the internal models for incremental default and migration risk and for correlation trading
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