Updated 17/12/2024
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CRR ToolDelegated Regulation 2024/397
Article 3

Article 3 - Stepwise method – non-modellable risk factors

Article 3

Stepwise method – non-modellable risk factors

1.   Under the stepwise method, institutions shall apply the following steps in the following order:

(a)

they shall, in accordance with Article 7, determine the time series of 10 business days returns for the non-modellable risk factor for the stress period determined in accordance with Article 12;

(b)

they shall determine an upward and a downward calibrated shock from the time series of 10 business days returns referred to in point (a) in accordance with:

(i)

the historical method set out in Article 8, where the number of returns in the time series of 10 business days returns referred to in point (a) of this paragraph is equal to or greater than 200;

(ii)

the asymmetrical sigma method set out in Article 9, where the number of returns in the time series of 10 business days returns referred to in point (a) of this paragraph is lower than 200 and equal to or greater than 12;

(iii)

the fallback method set out in Article 10, where the number of returns in the time series of 10 business days returns referred to in point (a) of this paragraph is lower than 12;

(c)

for each shock included in the following grid, institutions shall calculate the loss that occurs when that shock is applied to the non-modellable risk factor:

Formula

where:

—

CS down is the downward calibrated shock determined in accordance with point (b);

—

CS up is the upward calibrated shock determined in accordance with point (b).

2.   The shock which leads to the highest loss, among the shocks included in the grid referred to in paragraph 1, point (c), shall constitute the extreme scenario of future shock for the non-modellable risk factor.