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Market Risk Framework: Overview of questions for consultation

Market Risk Framework: Overview of questions for consultation



​ESBG (European Savings and Retail Banking Group)

Rue Marie-Thérèse, 11 - B-1000 Brussels

ESBG Transparency Register ID 8765978796-80

​6 January 2020​


>> .pdf version



Q1. The 'thresholds' template requires a breakdown of the 'on- and off-balance sheet business subject to market risk' into on-balance sheet and off-balance sheet business. Is that breakdown clear, or would you need ad-hoc definitions for differentiating 'on-balance sheet items' from 'off- balance sheet items' to ensure a proper implementation of the reporting requirements? Are there particular challenges or a burden involved in differentiating between on- and off- balance sheet items?

In our view, the proposed breakdown is not completely clear. Therefore, we would require a detailed definition (e.g. a list of the respective instruments and examples) by the EBA to correctly distinguish on-balance from off-balance sheet items, as provided for in draft template C 90.00.

 

Q2. Are the scope and level of application of the reporting requirements and the content of the templates and the instructions clear?

For reporting on a consolidated basis, in particular with regard to template C 91.00, it is not clear how to deal with different approaches applied by individual entities in the same scope of regulatory consolidation (e.g. entity A uses the MKR-ASA, entity B uses the simplified approach, while entity C does not have a trading book at all).

As we understand the proposed draft ITS, the consolidating entity has to calculate the group-wide own funds requirements for market risk, using the MKR-ASA. In this context, we see the need for clarification by the EBA, whether it is permissible for an entity to report template C 91.00 on an individual basis by using e.g. the simplified approach, while at the same time being covered by the MKR-ASA on a consolidated basis as part of the banking group.​

Background

The European Banking Authority (EBA) consults on specific supervisory reporting requirements for market risk, which are the first elements of the Fundamental Review of the Trading Book (FRTB) introduced by the revised Capital Requirements Regulation (CRR2) in the prudential framework of the EU. Mindful of the importance of expanding the reporting requirements resulting from the FRTB in a proportionate manner, the EBA is taking a gradual approach as institutions will also continue to be subject to the current market risk framework and the associated reporting requirements. This consultation paper is one of the deliverables presented in the EBA Roadmap on the risk reduction measures package, which includes the EBA’s strategy to implement the CRR2/CRD5, the BRRD2 and the IFR mandates in the reporting framework.




European Supervisory Authorities (EBA-ESMA); Financial reporting