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

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measuring risk is adequate and that this evenholds true for the extreme values resultingfrom the stressed periods. However, since thisperiod constitutes a historic period duringwhich, more often than not, the VaR modelwill already have been in use, in our view thisquestion is academic. After all, the aboveevidence will already been provided in theform of VaR adequacy.clarified to better reflect this view.Where sensitivities rather than full revaluationare used is where this VaR model has beenapproved. Therefore this approach, on astressed period which already occurred, isalready regarded as appropriate as it isauthorised.Para 10.9We believe the use of antithetic data shouldremain an example among others in the list ofpossible adaptations of the VaR methodologyto the Stressed VaR calibration (consistentwith basel 2.5) and should either be a‘compulsory’ or ‘preferred’ method. Oneobvious reason for that is the fact that usingantithetic date is relevant for historical VaRbut much less so for Monte Carlo where itcould distort the distribution.<strong>EBA</strong> agrees and believes the use of antithetic data is thepreferable approach in case of a significant drift inmarket data as mentioned in para 10.9.No change.Para 10.10Section 7 and 8 spell out a preference for fullrevaluations in the context of Stressed VaR.There are two reasons why this gives us causefor concern: On the one hand this shall informthe approach towards risk measurement. On<strong>EBA</strong> is indeed of the opinion that banks should movetowards full revaluation.No change.28
the other hand it means that VaR and thestressed VaR model will no longer be identicalin terms of their calculation method, resultingin the deployment of two different risk models.Para 12.6This addition of a new vague, unspecifiedcapital add-on, determined by the bank itself,is not appropriate. In fact, the supervisor isalready able to impose capital add-ons, ifdeemed necessary to take account of anyshortcomings in the internal models used.<strong>EBA</strong> has changed the wording in the final guidelines toclarify this requirement.Change wordingof para 12.6.Para 13.1Separate validation of the same proxy for VaRand SVaR would be extremely burdensome. Itwould effectively force the implementation oftwo inconsistent VaR models.<strong>EBA</strong> guidelines do not explicitly require a separatevalidation for VaR proxies used for Stressed VaRpurposes. However, institutions are required to showappropriateness of the use of same proxies for VaR andStressed VaR and to consider if/when a separatevalidation of proxies for Stressed VaR is necessary.No change.D. Use TestsChapter 15The concept of a use test for stressed VaR isdifficult. The more remote in time a stressperiod becomes, the less relevant risk driversand correlations become, and the harder itbecomes to demonstrate model use. Similarly,the use of the stressed VaR to validate theimpact of current VaR modelling choices doesnot appear very relevant.<strong>EBA</strong> believes the Stressed VaR can be used as anadditional risk management tool and can support riskmanagement decisions.No change.29
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 and 20: Feedback table on CP 48: analysis o
Page 21 and 22: can be achieved if the US moves ahe
Page 23 and 24: Para 6.8more distant past. Since th
Page 25 and 26: the need for an ex-post notificatio
Page 27: concern for us. We feel that this w
Page 31: V. Confirmation of compliance with

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

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