Article 14
Assessment of adequacy of trading limits
When assessing the adequacy of trading limits referred to in Article 103(2), point (b)(ii), Article 104b(2), points (c) and (f), and Article 325bi(1), point (b), of Regulation (EU) No 575/2013, competent authorities shall verify whether:
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(a) |
the institution has a clear breakdown of trading limits that is consistent with the acceptable level of risk set by the institution and the budget of each trading desk; |
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(b) |
the choice of the trading limits reflects the trading strategy of the trading desk and the nature of the underlying risks; |
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(c) |
the trading limits include the following:
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(d) |
the institution has a further breakdown in the value-at-risk limits, proportional to the institution’s trading strategies; |
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(e) |
all internal limits, including those referred to in point (c), are properly documented and formally approved; |
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(f) |
as part of the limit approval and update process, the risk control unit assesses and documents the consistency and compatibility between the value-at-risk limits approved by the management body and the rest of the internal limits not based on value-at-risk, including sensitivities or loss trigger; |
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(g) |
the institution properly documents and formally approves an inventory of authorised instruments and underlying risk positions that traders can enter. |
For the purposes of point (c)(i), the value-at-risk limit shall be the sum of individual value-at-risk limits when the permission to use the internal model approach, as referred to in Article 325(1), point (b), of Regulation (EU) No 575/2013, has not been granted.