Article 325bb | CRR | Regulation 575/2013

Article 325bb - Expected shortfall risk measure

Article 325bb

Expected shortfall risk measure

Institutions shall calculate the expected shortfall risk measure referred to in point (a) of Article 325ba(1) for any given date ‘t’ and for any given portfolio of trading book positions and non-trading book positions that are subject to foreign exchange or commodity risk as follows:

where:

ESt

the expected shortfall risk measure;

the index that denotes the five broad categories of risk factors listed in the first column of Table 2 of Article 325bd;

UESt

the unconstrained expected shortfall measure calculated as follows:

the unconstrained expected shortfall measure for broad risk factor category i and calculated as follows:

the supervisory correlation factor across broad categories of risk; ρ = 50 %;

the partial expected shortfall measure that shall be calculated for all the positions in the portfolio in accordance with Article 325bc(2);

the partial expected shortfall measure that shall be calculated for all the positions in the portfolio in accordance with Article 325bc(3);

the partial expected shortfall measure that shall be calculated for all the positions in the portfolio in accordance with Article 325bc(4);

the partial expected shortfall measure for broad risk factor category i that shall be calculated for all the positions in the portfolio in accordance with Article 325bc(2);

the partial expected shortfall measure for broad risk factor category i that shall be calculated for all the positions in the portfolio in accordance with Article 325bc(3); and

the partial expected shortfall measure for broad risk factor category i that shall be calculated for all the positions in the portfolio in accordance with of Article 325bc(4).

Institutions shall only apply scenarios of future shocks to the specific set of modellable risk factors applicable to each partial expected shortfall measure, as set out in Article 325bc, when determining each partial expected shortfall measure for the calculation of the expected shortfall risk measure in accordance with paragraph 1.

Where at least one transaction of the portfolio has at least one modellable risk factor which has been mapped to the broad risk factor category i in accordance with Article 325bd, institutions shall calculate the unconstrained expected shortfall measure for the broad risk factor category i and include it in the formula for the expected shortfall risk measure referred to in paragraph 1 of this Article.

By way of derogation from paragraph 1, an institution may reduce the frequency of the calculation of the unconstrained expected shortfall measures

and of the partial expected shortfall measures

and

for all broad risk factor categories i from daily to weekly, provided that both of the following conditions are met:

(a)

the institution is able to demonstrate to its competent authority that calculating the unconstrained expected shortfall measure

does not underestimate the market risk of the relevant trading book positions;

(b)

the institution is able to increase the frequency of calculation of

and

from weekly to daily where required by its competent authority.

PART ONE - GENERAL PROVISIONS (Article 1-24)

PART TWO - OWN FUNDS AND ELIGIBLE LIABILITIES (Article 25-91)

PART THREE - CAPITAL REQUIREMENTS (Article 92-386)

TITLE I - GENERAL REQUIREMENTS, VALUATION AND REPORTING (Article 92-106)

TITLE II - CAPITAL REQUIREMENTS FOR CREDIT RISK (Article 107-311)

TITLE III - OWN FUNDS REQUIREMENTS FOR OPERATIONAL RISK (Article 312-324)

TITLE IV - OWN FUNDS REQUIREMENTS FOR MARKET RISK (Article 325-377)

CHAPTER 1 - General provisions (Article 325-325b)

CHAPTER 1a - Alternative standardised approach (Article 325c-325ay)

CHAPTER 1b - Alternative internal model approach (Article 325az-325bp)

Section 1 - Permission and own funds requirements (Article 325az-325ba)

Section 2 - General requirements (Article 325bb-325bk)Article 325bb - Expected shortfall risk measure RTS Article 325bc - Partial expected shortfall calculations RTSQ&AGL Article 325bd - Liquidity horizons RTS Article 325be - Assessment of the modellability of risk factors RTSGL Article 325bf - Regulatory back-testing requirements and multiplication factors RTS Article 325bg - Profit and loss attribution requirement RTS Article 325bh - Requirements on risk measurement RTSGL Article 325bi - Qualitative requirements RTS Article 325bj - Internal validation RTS Article 325bk - Calculation of stress scenario risk measure RTS

Section 3 - Internal default risk model (Article 325bl-325bp)

CHAPTER 2 - Own funds requirements for position risk (Article 326-350)

CHAPTER 3 - Own funds requirements for foreign-exchange risk (Article 351-354)

CHAPTER 4 - Own funds requirements for commodities risk (Article 355-361)

CHAPTER 5 - Use of internal models to calculate own funds requirements (Article 362-377)

TITLE V - OWN FUNDS REQUIREMENTS FOR SETTLEMENT RISK (Article 378-380)

TITLE VI - OWN FUNDS REQUIREMENTS FOR CREDIT VALUATION ADJUSTMENT RISK (Article 381-386)

PART FOUR - LARGE EXPOSURES (Article 387-403)

PART FIVE - EXPOSURES TO TRANSFERRED CREDIT RISK (Article 404-410)

PART SIX - LIQUIDITY (Article 411-428az)

PART SEVEN - LEVERAGE (Article 429-429g)

PART SEVEN A - REPORTING REQUIREMENTS (Article 430-430c)

PART EIGHT - DISCLOSURE BY INSTITUTIONS (Article 431-455)

PART NINE - DELEGATED AND IMPLEMENTING ACTS (Article 456-464)

PART TEN - TRANSITIONAL PROVISIONS, REPORTS, REVIEWS AND AMENDMENTS (Article 465-520)

PART ELEVEN - FINAL PROVISIONS (Article 521)

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Article 325bb - Expected shortfall risk measure

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