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

the internal models of its different legalentities are authorised by different supervisoryauthorities.group is not considered relevant to thesubsidiary’sportfolio.Para 6.4One respondent argued that the formulaicapproach implies that the period of stress tobe selected should be the period of highestVaR for the given portfolio. This is notconsistent with the stated objective ofcalculating VaR over a period of stress and(para 6.4) ‘a conservative capital outcomerather than just selecting the period of highestvolatility’. It was recommended that ajudgment override be specifically introducedfor the formulaic approach.The <strong>EBA</strong> has a preference for the formulaic approach.However it recognizes that competent authorities shouldalso take into consideration the size and sophisticationlevel of the institution when an approach is chosen.No change.On the other hand, one respondent questionedwhy the <strong>EBA</strong> would accept judgement-ledapproaches; VaR approximations and a rangeof less onerous stress period monitoringtechniques when a national regulator has ruledthese out, and urge a re-think beforecompleting the final guidelines.Para 6.7The second part of the first sentence prohibitsweighting of historical data during the stressedperiod. In our view such exclusion is pointless.In practice, weightings could be calibrated in away that ensures that a predetermined weightshall simultaneously correspond to apredetermined period. To this end, morerecent time series could be given a higherweighting than periods dating back to thePara 6.7 follows the requirement from Basel on thispoint.No change.22