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Standardised approach for counterparty credit risk

Standardised approach for counterparty credit risk

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​​European savings and retail banking association responds to EBA consultation


>> See the response

>> Read: ESBG policy positions

>> Related: European Banking Authority consultation page




​BRUSSELS, 5 September 2019 – ESBG replied on 2 August to the EBA consultation on its four draft Regulatory Technical Standards (RTS) on the Standardised Approach for Counterparty Credit Risk (SA-CCR).

On the method for identifying the most material risk driver for those transactions with more than one material risk driver, ESBG responded that both the proposed set of thresholds are fine. Both options should be provided in the final RTS. Some ESBG members however tend to prefer option 1b, as it limits the inclusion of risk factors with small impact.

Regarding the general quantitative approach methodology, which hinges on FRTB SA sensitivities, the association of some 900 savings and retail banks in Europe opines that a frequent reconfiguration of mappings based on sensitivities might raise operational concerns. However, aligning the sensitivities with FRTB makes sense. ESBG calls for a sound, one-time assessment of risk drivers’ materiality at product level that should take place no later than the next quarterly reporting date after close of business.

On the appropriateness for smaller institutions to use the alternative SA CCR add-ons approach in overcoming the issues – if any – raised by the general FRTB SA sensitivities approach, ESBG would welcome opening the alternative approach to all institutions. Should this proposal prove not to be acceptable, application of the alternative approach should be possible for all institutions at least for positions for which they have no FRTB SA sensitivities.

Relating to the calculation of the supervisory delta of call and put options mapped to the interest rate category, both the proposed options  - 3a: application at currency level & 3b: application at transaction level – are fine, even though 3b reduces operational risk. Option 3b would in fact be easier to implement, since to determine the lambda for a specific transaction only parameters relating to precisely that transaction would be necessary, but also because the distortion accompanying the lambda shift would be minimised.

Addressing thresholds in the calculation of the shift (λ) for any call and put option, some ESBG members see 0.1% or 1% are the best options, however the impact will likely vary from institution to institution, so the threshold should, if possible, be chosen by the institution itself. Moreover, according to our opinion, an adjustment to the supervisory volatility parameter sigma as defined in Article 5 is not needed as the prescribed volatility assumptions seems to be a much cruder approximation anyway.

Finally, ESBG argues that the condition reading “where institutions apply the approach set out in Article 3(1)(a)” to determine long or short positions by assessing the cash flow or hedging purpose of the transaction should be deleted. Otherwise, the current wording means that FRTB sensitivities would have to be used for all other cases.



Standardization; Basel III; European Supervisory Authorities (EBA-ESMA); European Institutions