(a)

the institution has established, as part of the internal policies referred to in Article 325bi(1), point (e), of Regulation (EU) No 575/2013, criteria outlining:

(b)

the internal policies referred to in Article 325bi(1), point (e), of Regulation (EU) No 575/2013 cover all proxy approaches employed by the institution, including, where used:

(c)

for non-modellable risk factors, there is a clear rationale for using a proxy approach, even though the number of returns N in the time series for the risk factor resulting from Article 7 of Delegated Regulation (EU) 2024/397 would allow for using the historical method or the asymmetrical sigma method referred to, respectively, in Articles 8 and 9 of that Delegated Regulation;

(d)

the approach used to proxy the risk factor is appropriate and ensures, as required by Article 325bh(1), point (g), of Regulation (EU) No 575/2013, a conservative calibration of the scenarios of future shocks for modellable risk factors and of the extreme scenarios of future shock for non-modellable risk factors;

(e)

for risk factors for which proxy data are used only for specific periods in the time series, there are no anomalous jumps between the parts of the time series that are proxied and the parts of the time series that are not proxied.

(a)

the proxy approach used for those risk factors is the approach described in the internal policies as referred to in paragraph 1, point (a), and the proxy used is economically meaningful;

(b)

the basis risk between that risk factor as proxied and other risk factors is duly captured, including where different risk factors are proxied by mapping them to the same risk factor;

(c)

there are no cases where, as a result of the proxy, the specific risk is not duly captured.

(a)

require the institution to provide the time series of the proxied risk factors as used in the internal risk-measurement model and the time series of the corresponding pricing factors as used in the end-of-day valuation process;

(b)

verify that the volatilities of the two time series referred to in point (a) do not substantially diverge;

(c)

verify that the two time series are highly correlated.

(a)

require the institution to provide the time series of a sample of risk factors that are not proxied and that, if proxied, would follow the proxy approach being assessed;

(b)

require the institution to provide the time series that would be used by applying the proxy approach being assessed to the risk factors’ time series referred to in point (a);

(c)

for both time series, obtain the volatilities of the risk factors in the stress period and in the last 12-month period, and verify that the volatility resulting from the proxy time series referred to in point (b) does not underestimate the volatility resulting from the time series referred to in point (a).

(a)

require the institution to provide the original time series for the risk factors before any proxy approach has been used;

(b)

require the institution to provide the time series used for the proxied risk factors;

(c)

compare the upward and downward calibrated shocks as resulting from the application of Article 8 and 9 of Delegated Regulation (EU) 2024/397 to the time series referred to in points (a) and (b) of this paragraph, and verify that shocks resulting from the proxied time series are not systematically less conservative than the shocks obtained by using the original time series.