Article 325c
Scope, structure and qualitative requirements of the alternative standardised approach
1.
Institutions shall have in place, and make available to the competent authorities, a documented set of internal policies, procedures and controls for monitoring and ensuring compliance with the requirements of this Chapter. Any changes to those policies, procedures and controls shall be notified to the competent authorities in due course.
2.
Institutions shall calculate the own funds requirements for market risk in accordance with the alternative standardised approach for a portfolio of trading book positions or non-trading book positions that are subject to foreign exchange or commodity risk as the sum of the following three components:
(a)
the own funds requirement under the sensitivities-based method set out in Section 2;
(b)
the own funds requirement for the default risk set out in Section 5 which is only applicable to the trading book positions referred to in that Section;
(c)
the own funds requirement for residual risks set out in Section 4 which is only applicable to the trading book positions referred to in that Section.
3.
By way of derogation from paragraph 2, an institution shall calculate the own funds requirements for market risk in accordance with the alternative standardised approach for the institution’s holdings of its own debt instruments as the sum of the two components referred to in paragraph 2, points (a) and (c). When calculating the own funds requirements for market risk for own debt instruments under the sensitivities-based method referred to in paragraph 2, point (a), the institution shall exclude from that calculation the risks from the institution’s own credit spread.
4.
Institutions shall have a risk control unit that is independent from business trading units and that reports directly to senior management. That risk control unit shall be responsible for designing and implementing the alternative standardised approach. It shall produce and analyse monthly reports on the output of the alternative standardised approach, as well as the appropriateness of the institution’s trading limits.
5.
Institutions shall independently review the alternative standardised approach they use for the purposes of this Chapter to the satisfaction of the competent authorities, either as part of their regular internal auditing process, or by mandating a third-party undertaking to conduct that review. The outcome of such a review shall be reported to the appropriate management bodies.
For the purposes of the first subparagraph, ‘third-party undertaking’ means an undertaking that provides auditing or consulting services to institutions and that has staff with sufficient skills in the area of market risk.
6.
The review of the alternative standardised approach referred to in paragraph 5 shall cover the activities of both the business trading units and of the independent risk control unit and shall assess at least the following:
(a)
the internal policies, procedures and controls for monitoring and ensuring compliance with the requirements referred to in paragraph 1 of this Article;
(b)
the adequacy of the documentation of the risk management system and processes and the organisation of the risk control unit referred to in paragraph 4 of this Article;
(c)
the accuracy of sensitivity computations and of the process used to derive those computations from the institution’s pricing models that serve as a basis for reporting profit and loss to senior management, as referred to in Article 325t;
(d)
the verification process that the institution employs to evaluate the consistency, timeliness and reliability of the data sources used in the calculation of the own funds requirements for market risk using the alternative standardised approach, including the independence of those data sources.
An institution shall conduct the review referred to in the first subparagraph at least once a year, or on a less frequent basis of up to every two years where the institution can demonstrate to the satisfaction of the competent authority that the size, systemic importance, nature, scale and complexity of its trading book business justifies a less frequent review.
7.
Competent authorities shall verify that the calculation referred to in paragraph 2 of this Article, including the implementation by an institution of the requirements set out in this Chapter and in Article 325a, is performed with integrity.
8.
EBA shall develop draft regulatory technical standards to specify the assessment methodology under which competent authorities conduct the verification referred to in paragraph 7;
EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2028.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.