Article 455
Use of internal models for market risk
1.
An institution using the internal models referred to in Article 325az for the calculation of the own funds requirements for market risk shall disclose:
(a)
its objectives in undertaking trading activities and the processes implemented to identify, measure, monitor and control the market risk;
(b)
the policies referred to in Article 104(1) for determining which position is to be included in the trading book;
(c)
a general description of the structure of the trading desks covered by the internal models, including for each desk a broad description of the desk’s business strategy, the instruments permitted therein and the main risk types in relation to that desk;
(d)
an overview of the trading book positions not covered by the internal models, including a general description of the desk structure and of types of instruments included in the desks or in the desk categories in accordance with Article 104b;
(e)
the structure and organisation of the market risk management function and governance;
(f)
the scope, the main characteristics and the key modelling choices of the different internal models used to calculate the risk exposure amounts for the main models used at the consolidated level, and a description of the extent to which those internal models represent the models used at the consolidated level, including, where applicable, a broad description of the following:
(i)
the modelling approach used to calculate the expected shortfall referred to in Article 325ba(1), point (a), including the frequency of data update;
(ii)
the methodology used to calculate the stress scenario risk measure referred to in Article 325ba(1), point (b), other than the specifications provided for in Article 325bk(3);
(iii)
the modelling approach used to calculate the default risk charge referred to in Article 325ba(2), including the frequency of data update.
2.
Institutions shall disclose on an aggregate basis for all trading desks covered by the internal models referred to in Article 325az the following components, where applicable:
(a)
the most recent value as well as the highest, lowest and mean value for the previous 60 business days of:
(i)
the unconstrained expected shortfall measure referred to in Article 325bb(1);
(ii)
the unconstrained expected shortfall measure referred to in Article 325bb(1) for each regulatory broad risk factor category;
(b)
the most recent value as well as the mean value for the previous 60 business days of:
(i)
the expected shortfall risk measure referred to in Article 325bb(1);
(ii)
the stress scenario risk measure referred to in Article 325ba(1), point (b);
(iii)
the own funds requirement for default risk referred to in Article 325ba(2);
(iv)
the sum of the own funds requirements referred to in Article 325ba(3), including all components of the formula and the applicable multiplier factor;
(c)
the number of back-testing overshootings over the most recent 250 business days at the 99th percentile as referred to in Article 325bf(6).
3.
Institutions shall disclose on an aggregate basis for all trading desks the own funds requirements for market risk that would be calculated in accordance with Part Three Title IV, Chapter 1a, had the institutions not been granted permission to use their internal models for those trading desks.