Article 28 | Delegated Regulation 2024/1085

Article 28 - Assessment of commodity risk factors

Article 28

Assessment of commodity risk factors

1. When assessing an institution’s compliance with the requirements set out in Article 325bh(1), point (f), of Regulation (EU) No 575/2013 in relation to the modelling of commodity risk, competent authorities shall:

(a)

require the institution:

(i)	to provide a list of all the types of commodities towards which the institution’s portfolio is sensitive;

(ii)	for each of the commodity type referred to in point (i), to clarify whether that commodity type is subject to the spot price of the commodity only, or other risk factors, including implied volatilities;

(iii)

to provide a sensitivity analysis of its portfolio towards each of the commodity types referred to in point (a);

(b)

verify whether the institution’s internal policies identify metrics that are appropriate to assess the materiality of a commodity market as referred to in Article 325bh(1), point (f), of Regulation (EU) No 575/2013 and whether, for commodity markets identified as material, each different commodity is specifically modelled in the institution’s internal risk-measurement model;

(c)	verify whether the basis risk between similar but not identical commodities towards which the institution has material exposure is captured, including the basis risk stemming from a different place of delivery and from maturity mismatches;

(d)	assess whether the risk in changes in commodity curves is duly captured as required by Article 29 of this Regulation;

(e)	assess whether vega risk related to commodity risk is duly captured as required by Article 30 of this Regulation.

For the purposes of point (c), competent authorities shall verify whether the institution models two different commodities directly or captures the basis by means of a basis risk factor.

2. By way of derogation from paragraph 1, points (a)(i) and (ii), competent authorities may require the institution to provide the information referred to in those points for the most relevant commodities only, and may perform the assessment set out in that paragraph 1 on those data.

CHAPTER 1 - GENERAL PROVISIONS (Article 1-4)

CHAPTER 2 - ASSESSMENT OF QUALITATIVE REQUIREMENTS (Article 5-21)

CHAPTER 3 - ASSESSMENT OF THE INTERNAL RISK-MEASUREMENT MODEL USED TO COMPUTE THE EXPECTED SHORTFALL RISK MEASURE AND THE STRESS SCENARIO RISK MEASURE (Article 22-44)

SECTION 1 - Overview of the assessment (Article 22)

SECTION 2 - Assessment of the internal risk measurement model’s risk factors set-up and properties (Article 23-33)

Subsection 1 - Assessment of the internal risk measurement model’s risk factors set-up (Article 23-31)Article 23 - Assessment of the internal risk-measurement model’s coverage of the risk Article 24 - Assessment of general interest rates risk factors Article 25 - Assessment of equity risk factors Article 26 - Assessment of credit spread risk factors Article 27 - Assessment of foreign exchange risk factors Article 28 - Assessment of commodity risk factors Article 29 - Assessment of curves Article 30 - Assessment of implied volatility surfaces Article 31 - Assessment of correlation risk factors

Subsection 2 - Assessment of the risk factors properties (Article 32-33)

SECTION 3 - Assessment of proxies and data quality (Article 34-35)

SECTION 4 - Assessment of compliance with requirements relating to the back-testing and profit-loss attribution test (Article 36-38)

SECTION 5 - Assessment of compliance with requirements relating to the treatment of foreign-exchange and commodity risk in the non-trading book (Article 39)

SECTION 6 - Assessment of the calculation of the expected shortfall risk measures and the stress scenario risk measure (Article 40-44)

CHAPTER 4 - ASSESSMENT OF THE INTERNAL DEFAULT RISK MODEL USED TO COMPUTE THE ADDITIONAL OWN FUNDS REQUIREMENT FOR DEFAULT RISK (Article 45-52)

CHAPTER 5 - FINAL PROVISIONS (Article 53)

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Article 28 - Assessment of commodity risk factors

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