EBA Guidelines on Stressed Value At Risk (Stressed VaR) EBA/GL ...

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comply with the <strong>EBA</strong> guidelines this will bedifficult and will lead to significant additionalcosts and resources which are already tied upwith the implementation of Basel III/CRDIVrequirements.the guidelines or that it will lead to significant additionalcosts.ImplementationGLThe timing for making the model changesremains unclear: we understand that the <strong>EBA</strong>will issue final guidance late in the first quarterof 2012 and that there will then be a sixmonth period in which the guidance will betransposed into national requirements atwhich point banks would have to be compliant.If so the timetable is too short to implementany potential model changes.Indeed, as mentioned in the guidelines, the <strong>EBA</strong> expectscompetent authorities to implement the guidelineswithin six months after publication of the finalguidelines. Indirectly this means that <strong>EBA</strong> expectsinstitutions to comply with the guidelines as soon asthey are implemented by the competent authorities intheir supervisory practices, but in any case within sixmonths after publication of the final guidelines.No change.The <strong>EBA</strong> believes sufficient time is given to competentauthorities and institutions to implement the guidelines.Level PlayingField with USThe US continues to be stalled in theimplementation of the Basel 2.5 Trading Bookamendments because of the Dodd-Frank Actrequirement to remove all references toratings from regulation. However, the Noticeof Proposed Rulemaking that was issued bythe US authorities in December 2010 alreadydiverges in a number of areas from the CRD 3requirements. The <strong>EBA</strong> draft guidelines furthertie EU firms to an inflexible model before theUS has implemented Basel 2.5. Flexibilityshould be retained so that a level playing fieldAlthough the comment raised is important, it is notdirectly relevant to the guidelines on Stressed VaR.The <strong>EBA</strong> will communicate the concerns raised to theEuropean Commission.No change.20
can be achieved if the US moves ahead.BaselFundamentalreview ofTrading bookThe Basel Committee’s Fundamental Review ofthe Trading Book will most likely lead to acomprehensive change in the treatment ofmarket risk. It is expected that the BaselCommittee will issue new proposals before theend of 2012. The adjustments to the modelsset out in these <strong>EBA</strong> consultation papers maybe redundant following the FundamentalReview.The guidelines on Stressed VaR relate to the CRD IIIand have also been included in the current CRR/CRDIVproposals.In any case, the <strong>EBA</strong> is following the developments ofthe fundamental review of the trading book that iscurrently conducted in Basel and it does not expect anyfinal conclusion soon nor any transpositions to theCRR/CRD following the fundamental review in the shortor medium term.No change.A. Identification and validation of the stressed periodPara 5.2Most respondents argued that the wording ofparagraph 5.2 is too vague.The provisionappearsto demand the selection of a specific12-month historic stress period for each legalentity that reports VaR. This would beextremely problematic from a processperspective. Banks would have to run theperiod selection process for multiple legalentities. Globally active banks should bepermitted to apply universally the stressperiod they select on group level.Clarification is also required about whichcompetent authority should approve theapproach to identifying the stressed periodadopted by globally active banks, given thatThe choice of the stressed period is subject to approvalby the competent authorities.The competent authorities for an EU institution are thecompetent authorities responsible for the exercise ofsupervision on a consolidated basis of this EU institutionand, in the case of an internal model also recognised ata subsidiary’s level, the competent authoritiesresponsible for the exercise of supervision of this EUinstitution’s subsidiary.The competent authorities approve the stressed perioddefined at group level according to Article 37(2) ofDirective 2006/49/EC referring to Article 129 ofDirective 2006/48/EC. They may alsorequire an EUinstitution to determine a different stressed period at asubsidiary’s level if the stressed period defined for theSection 5 hasbeen re-drafted.21
Page 1 and 2: EBA Guidel
Page 3 and 4: I. Executive SummaryThe amendments
Page 5 and 6: The guidelines presented in this pa
Page 7 and 8: ContentsIII. EBA <
Page 9 and 10: VaR calculations (which would also
Page 11 and 12: ange of potential historical period
Page 13 and 14: C. Stressed VaR methodology10. Cons
Page 15 and 16: 9. In terms of calibration to marke
Page 17 and 18: historical data series should be ap
Page 19: Feedback table on CP 48: analysis o
Page 23 and 24: Para 6.8more distant past. Since th
Page 25 and 26: the need for an ex-post notificatio
Page 27 and 28: concern for us. We feel that this w
Page 29 and 30: the other hand it means that VaR an
Page 31: V. Confirmation of compliance with

EBA Guidelines on Stressed Value At Risk (Stressed VaR) EBA/GL ...

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