2021/03/11

Commission Delegated Regulation (EU) 2021/424 amending the CRR with regard to the alternative standardised approach for market risk (FRTB-SA) was published in the Official Journal of the EU and will enter into force on 31 March 2021 and apply from 30 September 2021. The new regulation amends the CRR by providing technical specifications that were previously missing to ensure that it is fully operational and consistent with the BCBS’s revised “Minimum capital requirements for market risk”. This includes, for example, specification of the calculation of the own funds requirements for curvature risk for instruments with optionality to avoid double counting in the case of foreign-exchange (FX) risk factors; rules for the use of own funds calculations based on curvature risk (rather than delta risk) for instruments without optionality; treatment of positions in collective investment undertakings (CIUs) – including a simplified approach for credit valuation adjustment (CVA) risk of derivative positions; the concept of an additional ‘base currency’ approach for the own funds calculations for delta and curvature risks of FX factors; introduction of BCBS-consistent intra-bucket correlations for covered-bond risk factors issued by credit institutions in third countries, the intra-bucket correlations for equity risk, and the correlations across buckets for equity risk; and alignment of the risk weights in the FRTB-SA applicable to the sensitivities of the risk-free rate-risk factors, of inflation and to cross-currency basis-risk factors, to the credit-spread risk factors for non-securitisations of Bucket 11 in Table 4 of Art. 325ah CRR, of covered-bond risk factors issued by credit institutions in third countries, of credit-spread risk factors for securitisations included in the alternative correlation trading portfolio (ACTP) and not included in the ACTP, of equity risk factors, and of commodity risk factors.

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