Banks interested in migrating to IMA for computing capital charge for market risk are advised to assess their preparedness with reference to these guidelines. in this template should reflect the risk measures (used for regulatory purposes) calibrated to a one-day holding period to compare with the 99% of confidence level with its trading outcomes. 3 0 obj NMRF are factors that affect pricing, but cannot be included in the extended shortfall calculation. Even with these ambiguities resolved, implementing FRTB is still likely to be challenging. 8% of the capital charge for specific risk according to, Present a comparison of the results of estimates from the regulatory VaR model with both hypothetical and actual trading outcomes, to highlight the frequency and the extent of the backtesting exceptions, and to give an analysis of the main outliers in backtested results, as per. RBI will first make a preliminary assessment of the bank’s risk management system and its modelling process. Description of stress testing applied to the modelling parameters; Description of the approach used for backtesting/validating the accuracy and internal consistency of data and parameters used for the internal models and modelling processes. endobj 3. The requirement in Section B, item (g) applies to VaR and sVaR models. The analysis should at least specify the key drivers of the exceptions. Market risk under the standardised approach: Template MR1 - Market risk under standardised approach. a shift from value-at-risk (VaR) in the IMA to an expected shortfall (ES) measure of risk under stress; a means of incorporating the risk of market illiquidity; Standardised approach (SA) The SA comprises three main blocks: the sensitivities-based method (SBM), the … Market Risk File –Important part of IMA Application Describes the internal model, the risk-management control system and should substantiate the compliance with the quantitative and qualitative requirements of these guidelines. In the IMA the framework introduces the expected shortfall (ES), substituting the value at risk (VaR) as a measure for the measurement of market risk. iii. Changes in RWA amounts over the reporting period for each of the key drivers should be based on a bank's reasonable estimation of the figure. Internal models approach (IMA) The internal models approach is one of two methods banks can use to calculate market risk capital requirements under the forthcoming Fundamental Review of the Trading Book. View our latest in market leading training courses, both public and in-house. The most advanced methodology for calculating EAD is the IMM approach as it authorises banks to use their own internal models. There are two prescribed approaches to calculate the market risk under FRTB. Scope of application: The template is mandatory for banks using the standardised approach for market risk. The template is mandatory for all banks using an internal model approach for their market risk exposures. %PDF-1.5 Significant updates to the model to reflect recent experience (eg recalibration), as well as significant changes in model scope; if more than one model update has taken place, additional rows could be necessary. 2 0 obj x��UMO�@�[���)����n$�TZ�R�F�!p@4����@���;�6�1Nd�\V����7��������b8����h��%"�R��)k6�4�v�4!��� �f'hq�&_�Ί! BIS acknowledges that though SA-CVA is an adaptation of the sensitivity-based approach for market risk to the CVA book, there are several important variances between SA-CVA and SA-TB, e.g. The disclosure requirements under this section are: Table MRA - Qualitative disclosure requirements related to market risk. The BIS's mission is to serve central banks in their pursuit of monetary and financial stability, to foster international cooperation in those areas and to act as a bank for central banks. The impact of the new CVA risk regulatory framework on the calculation methods and the bank’s current state infrastructure could be a turning point for many medium-sized institutions. For banks using other than the standardised approach for most of their market risk exposures, exposures and RWA amounts under the standardised approach may be negligible. Changes in RWA amounts over the reporting period for each of the key drivers should be based on a bank's reasonable estimation of the figure. This is a simplified calculation for the CVA capital charge based on EAD’s and effective maturities M’s. Alignment with industry practices for accounting purposes Please refer to our circular DBOD BP. Foreign exchange: Changes in RWA under the market risk internal models approach arising from foreign currency translation movements.

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