Article 2
Material changes to, and material extensions of, the use of alternative internal models
1. Institutions shall categorise changes to the use of their alternative internal models as material, as referred to in Article 1(1), point (a), where those changes fulfil any of the following conditions:
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(a) |
they meet any of the qualitative criteria set out in Part I of the Annex; |
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(b) |
they result in a change equal to or higher than 1 %, in absolute terms, calculated for the first business day of the testing of the impact of the change, of any of the risk numbers Rn i as set out in paragraph 4 which are considered relevant pursuant to paragraph 5, and result in any of the following:
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2. Institutions shall categorise extensions of the use of their alternative internal models as material, as referred to in Article 1(1), point (a), where those extensions fulfil any of the following conditions:
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(a) |
they meet any of the qualitative criteria set out in Part I of the Annex; |
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(b) |
they result in a change equal to or higher than 1 %, in absolute terms, calculated for the first business day of the testing of the impact of the extension, of any of the risk numbers Rn i set out in paragraph 4 which are considered relevant pursuant to paragraph 5, and result in any of the following:
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3. By way of derogation from paragraphs 1 and 2, institutions shall not categorise as material extensions and changes to the use of their alternative internal models that were requested by their competent authority.
4. To assess whether the conditions in paragraph 1, point (b), and paragraph 2, point (b), are fulfilled, institutions shall consider the following risk numbers Rn i :
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(a) |
Rn 1, the institution’s previous day’s expected shortfall risk measure (ESt-1) referred to in Article 325ba(1), point (a)(i), of Regulation (EU) No 575/2013, for the portfolio of all positions referred to in paragraph 10 of this Article; |
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(b) |
Rn 2, the institution’s previous day’s stress scenario risk measure (SSt-1) referred to in Article 325ba(1), point (a)(ii), of Regulation (EU) No 575/2013, for the portfolio of all positions referred to in paragraph 10 of this Article; |
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(c) |
Rn 3, the most recent own funds requirement for default risk referred to in Article 325ba(2), point (a), of Regulation (EU) No 575/2013, for the portfolio of all positions referred to in paragraph 10 of this Article. |
5. Institutions shall consider the risk number Rn i set out in paragraph 4 as relevant where that risk number fulfils all the following conditions:
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(a) |
on at least one day over the period referred to in paragraph 9:
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(b) |
on the first business day of the testing of the impact of the extension or change:
where S IMA is the sum referred to in paragraph 1, point (b)(i). |
Institutions shall check the conditions referred to in the first subparagraph both with and without the extension or change to the use of their alternative internal models.
6. To assess whether the conditions in paragraph 1, point (b)(i) or (b)(iii), are fulfilled, institutions shall determine the impact of the change to the use of their alternative internal models by taking the highest increase, in absolute terms over the period referred to in paragraph 9, of the ratios set out in paragraphs 7 or 8, respectively.
To assess whether the conditions in paragraph 1, point (b)(ii) or (b)(iv), are fulfilled, institutions shall determine the impact of the change to the use of their alternative internal models by taking the highest decrease, in absolute terms over the period referred to in paragraph 9, of the ratios set out in paragraphs 7 or 8, respectively.
To assess whether the conditions in paragraph 2, point (b)(i) or (b)(ii), are fulfilled, institutions shall determine the impact of the extension to the use of their alternative internal models by taking the highest change, in absolute terms over the period referred to in paragraph 9, of the ratios set out in paragraphs 7 or 8, respectively.
7. Institutions shall calculate the ratio to be used for assessing whether the conditions set out in paragraph 1, points (b)(i) and (ii), or paragraph 2, point (b)(i), are fulfilled as follows:
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(a) |
in numerator, the difference between the sum S IMA referred to in paragraph 1, point (b)(i), with and without the extension or change to the use of their alternative internal models; |
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(b) |
in the denominator, the sum S IMA referred to in paragraph 1, point (b)(i), without the extension or change to the use of their alternative internal models. |
8. Institutions shall calculate the ratio to be used for assessing whether the conditions set out in paragraph 1, points (b)(iii) and (iv), and paragraph 2, point (b)(ii), are fulfilled as follows:
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(a) |
in the numerator, the difference between the relevant risk number Rn i referred to in paragraph 4, with and without the extension or change to the use of their alternative internal models; |
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(b) |
in the denominator, the relevant risk number Rn i referred to in paragraph 4, without the extension or change to the use of their alternative internal models. |
9. Institutions shall calculate the ratios referred to in paragraphs 7 and 8 for a period of 15 consecutive business days starting from the first business day of the testing of the impact of the extension or change to the use of their alternative internal models.
The choice of the 15 consecutive business days period shall be representative of the trading and hedging activity under normal market conditions for the portfolio of positions affected by the extension or change to the use of their alternative internal models. That period shall be part of the 9 months preceding the notification or request for permission to their competent authority as referred to in Article 325az(7) of Regulation (EU) No 575/2013.
10. Institutions shall calculate the risk numbers Rn i set out in paragraph 4 for the portfolio of all positions assigned to trading desks which fulfil all the requirements set out in of Article 325az(2) of Regulation (EU) No 575/2013 at the moment of notification or request of permission to their competent authority as referred to in Article 325az(7) of Regulation (EU) No 575/2013.