EBA Publishes Consultation Paper on RTS on Standardized Approach for Counterparty Credit Risk

  On May 2, the European Banking Authority (EBA) published a consultation paper on four draft regulatory technical standards (RTS) on the standardized approach for counterparty credit risk under Article 277(5) and Article 279a(3) of the proposed Regulation mending the Capital Requirements Regulation (575/2013) (CRR II). These proposals build on the proposals included in the discussion paper published in December 2017 (which can be found here) and include specifying methods for the mapping of derivative transactions to risk categories, a formula for the calculation of the supervisory delta of options mapped to the interest rate risk category and a method for determining whether derivative transactions are long or short in their risk drivers. A three-pronged approach is proposed for the assignment of a derivative transaction to a risk category: Qualitative approach – identifies derivative transactions that clearly have only one material risk driver. Qualitative and…

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