The most significant change is in the market risk framework, where the EBA is proposing brand new templates for the collection of the internal model approach (IMA) risk measures under the fundamental review of the trading book (FRTB).
The European Banking Authority (EBA) today published a consultation paper amending the Implementing Regulation on the benchmarking of credit risk, market risk and IFRS9 models for the 2025 exercise. For credit risk only minor changes are being proposed. This consultation runs until 27 March 2024.
The EBA benchmarking exercise is the basis for both the supervisory assessment and the horizontal analysis of the outcome of internal models. It ensures consistent monitoring of the variability of own funds requirements resulting from the application of internal models as well as of the impact of the several different supervisory and regulatory measures, which influence the capital requirements and solvency ratios in the EU. In this regard, this consultation paper updates the information to be collected in the 2025 exercise.
As regards the market risk benchmarking, the most important change is the provision of new templates, together with instructions, for the collection of the IMA FRTB risk measures (expected shortfall, default risk charge, and stress scenario risk measure. The EBA is also suggesting to reshape market portfolio and to expand the validation portfolios for the Alternative Standardised Approach.
For the credit risk benchmarking, the EBA is proposing only very minor changes. In particular, the aim is to clarify the mandatory nature (if applicable) of reporting the probability of default and the loss given default risk parameters concerning the Margin of Conservatism, regulatory add-on, and downturn component. Lastly, these changes also clarify the use of internal model IDs used with the Competent Authorities.
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