Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 Text with EEA relevance

Subsection 2 Own funds requirements for the default risk for securitisations not included in the ACTP

Article 325z

Jump-to-default amounts

5. Article 325x shall apply to both existing securitisation exposures and to securitisation exposures used in accordance with paragraph 3 or 4 of this Article. The relevant maturities shall be those of the securitisation tranches.

Article 325aa

Calculation of the own funds requirement for the default risk for securitisations

• (a) one common bucket for all corporates, regardless of the region;

• (b) 44 different buckets corresponding to one bucket per region for each of the 11 asset classes defined in the second subparagraph.

For the purposes of the first subparagraph, the 11 asset classes are ABCP, auto loans/leases, residential mortgage-backed securities (RMBS), credit cards, commercial mortgage-backed securities (CMBS), collateralised loan obligations, collateralised debt obligations squared (CDO-squared), small and medium-sized enterprises (SMEs), student loans, other retail, other wholesale. The four regions are Asia, Europe, North America, and rest of the world.

7. The final own funds requirement for the default risk for securitisations not included in the ACTP shall be calculated as the simple sum of the bucket-level own funds requirements.

Subsection 3 Own funds requirements for the default risk for securitisations included in the ACTP

Article 325ab

Scope

1. For the ACTP, the own funds requirements shall include the default risk for securitisation exposures and for non-securitisation hedges. Those hedges shall be removed from the default risk calculations for non-securitisation. There shall be no diversification benefit between the own funds requirements for the default risk for non-securitisations, the own funds requirements for the default risk for securitisations not included in the ACTP and own funds requirements for the default risk for securitisations included in the ACTP.

Article 325ac

Jump-to-default amounts for the ACTP

• (a) ‘decomposition with a valuation model’ means that a single name constituent of a securitisation is valued as the difference between the unconditional value of the securitisation and the conditional value of the securitisation assuming that single name defaults with an LGD of 100 %;

• (b) ‘replication’ means that the combination of individual securitisation index tranches are combined to replicate another tranche of the same index series, or to replicate an untranched position in the index series;

• (c) ‘decomposition’ means replicating an index by a securitisation of which the underlying exposures in the pool are identical to the single name exposures that compose the index.

• (a) attachment point = (N – 1) / Total Names;

• (b) detachment point = N / Total Names; where ‘Total Names’ shall be the total number of names in the underlying basket or pool.

• (a) for indices, index tranches and bespoke tranches, offsetting shall be possible across maturities within the same index family, series and tranche, subject to the provisions on exposures of less than one year laid down in Article 325x; long gross JTD amounts and short gross JTD amounts that perfectly replicate each other may be offset through decomposition into single name equivalent exposures using a valuation model; in such cases, the sum of the gross JTD amounts of the single name equivalent exposures obtained through decomposition shall be equal to the gross JTD amount of the undecomposed exposure;

• (b) offsetting through decomposition as set out is point (a) shall not be allowed for resecuritisations or derivatives on securitisation;

• (c) for indices and index tranches, offsetting shall be possible across maturities within the same index family, series and tranche by replication or by decomposition; where the long exposures and short exposures are otherwise equivalent, apart from one residual component, offsetting shall be allowed and the net JTD amount shall reflect the residual exposure;

- (d) different tranches of the same index series, different series of the same index and different index families may not be used to offset each other.

Article 325ad

Calculation of the own funds requirements for the default risk for the ACTP

• (a) for non-tranched products, the default risk weights corresponding to their credit quality as specified in Article 325y(1) and (2);

• (b) for tranched products, the default risk weights referred to in Article 325aa(1).

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where:

DRCb	=	the own funds requirement for the default risk for bucket b;
---	---	---
i	=	an instrument belonging to bucket b; and
---	---	---
WtSACTP	=	the ratio recognising a benefit for hedging relationships within a bucket, which shall be calculated in accordance with the WtS formula set out in Article 325y(4), but using long positions and short positions across the entire ACTP and not just the positions in the particular bucket.

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where:

DRCACTP	=	the own funds requirement for the default risk for the ACTP; and

| | | |

| --- | --- | --- | | DRCb | = | the own funds requirement for the default risk for bucket b. |

Section 6 Risk weights and correlations

Subsection 1 Delta risk weights and correlations

Article 325ae

Risk weights for general interest rate risk

1. For currencies not included in the most liquid currency sub-category as referred to in point (b) Article 325bd(7), the risk weights of the sensitivities to the risk-free rate risk factors shall be the following:

Table 3

Bucket	Maturity	Risk Weight
1	0,25 years	1,7 %
2	0,5 years	1,7 %
3	1 year	1,6 %
4	2 years	1,3 %
5	3 years	1,2 %
6	5 years	1,1 %
7	10 years	1,1 %
8	15 years	1,1 %
9	20 years	1,1 %
10	30 years	1,1 %

• (a) for risk-free rate risk factors, the risk weights referred to in paragraph 1, Table 3, of this Article divided by Image omitted; see official source;

- (b) for inflation risk factor and cross currency basis risk factors, the risk weights referred to in paragraph 2 of this Article divided by Image omitted; see official source.

Article 325af

Intra bucket correlations for general interest rate risk

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where:

Tk (respectivelyTl)	=	the maturity that relates to the risk free rate;
---	---	---
θ	=	3 %

5. Between any given weighted sensitivity of cross-currency basis risk factors WSk and any given weighted sensitivity of general interest rate risk factors WSl, including another cross-currency basis risk factor, the correlation shall be set at 0 %.

Article 325ag

Correlations across buckets for general interest rate risk

2. The parameter γbc = 80 % shall be used to aggregate an interest rate risk factor based on a currency as referred to in Article 325av(3) and an interest rate risk factor based on the euro.

Article 325ah

Risk weights for credit spread risk for non-securitisations

1. Risk weights for the sensitivities to credit spread risk factors for non-securitisations shall be the same for all maturities (0,5 years, 1 year, 3 years, 5 years, 10 years) within each bucket in Table 4:

Table 4

Bucket number	Credit quality	Sector	Risk weight
1	All	Central government, including central banks, of Member States	0,5 %
2	Credit quality step 1 to 3	Central government, including central banks, of a third country, multilateral development banks and international organisations referred to in Article 117(2) or Article 118	0,5 %
3	Credit quality step 1 to 3	Regional or local authority and public sector entities	1,0 %
4	Credit quality step 1 to 3	Financial sector entities including credit institutions incorporated or established by a central government, a regional government or a local authority and promotional lenders	5,0 %
5	Credit quality step 1 to 3	Basic materials, energy, industrials, agriculture, manufacturing, mining and quarrying	3,0 %
6	Credit quality step 1 to 3	Consumer goods and services, transportation and storage, administrative and support service activities	3,0 %
7	Credit quality step 1 to 3	Technology, telecommunications	2,0 %
8	Credit quality step 1 to 3	Health care, utilities, professional and technical activities	1,5 %
9		Covered bonds issued by credit institutions established in Member States	1,0 %
10	Credit quality step 1	Covered bonds issued by credit institutions in third countries	1,5 %
10	Credit quality steps 2 to 3	Covered bonds issued by credit institutions in third countries	2,5 %
11	Credit quality step 4 to 6 and unrated	Central government, including central banks, of a third country, multilateral development banks and international organisations referred to in Article 117(2) or Article 118	2 %
12	Credit quality step 4 to 6 and unrated	Regional or local authority and public sector entities	4,0 %
13	Credit quality step 4 to 6 and unrated	Financial sector entities, including credit institutions incorporated or established by a central government, a regional government or a local authority, promotional lenders and covered bonds	12,0 %
14	Credit quality step 4 to 6 and unrated	Basic materials, energy, industrials, agriculture, manufacturing, mining and quarrying	7,0 %
15	Credit quality step 4 to 6 and unrated	Consumer goods and services, transportation and storage, administrative and support service activities	8,5 %
16	Credit quality step 4 to 6 and unrated	Technology, telecommunications	5,5 %
17	Credit quality step 4 to 6 and unrated	Health care, utilities, professional and technical activities	5,0 %
18	Other sector	Other sector	12,0 %
19	Listed credit indices with a majority of its individual constituents being investment grade	Listed credit indices with a majority of its individual constituents being investment grade	1,5 %
20	Listed credit indices with a majority of its individual constituents being non-investment grade or unrated	Listed credit indices with a majority of its individual constituents being non-investment grade or unrated	5 %

For the purposes of this Article, an exposure shall be assigned the credit quality category corresponding to the credit quality category that it would be assigned under the standardised approach for credit risk set out in Title II, Chapter 2.

3. By way of derogation from paragraph 2, institutions may assign a risk exposure of an unrated covered bond to bucket 4 where the institution that issued the covered bond has credit quality step 1 to 3.

Article 325ai

Intra-bucket correlations for credit spread risk for non-securitisations

l between two sensitivities WSk and WSl within the same bucket shall be set as follows:

ρkl = ρkl ^(name) · ρkl ^(tenor) · ρkl ^(basis)

where:

ρkl ^(name) shall be equal to 1 where the two names of sensitivities k and l are identical; it shall be equal to 35 % where the two names of sensitivities k and l are in buckets 1 to 18 in Article 325ah(1), Table 4, otherwise it shall be equal to 80 %;

ρkl ^(tenor) shall be equal to 1 where the two vertices of the sensitivities k and l are identical, otherwise it shall be equal to 65 %; and

ρkl ^(basis) shall be equal to 1 where the two sensitivities are related to the same curves, otherwise it shall be equal to 99,90 %.

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Article 325aj

Correlations across buckets for credit spread risk for non-securitisations

The correlation parameter γbc that applies to the aggregation of sensitivities between different buckets shall be set as follows:

γbc = γbc ^(rating) · γbc ^(sector)

where:

γbc ^(rating) shall be equal to:

• (a) 1, where buckets b and c are buckets 1 to 17 and both buckets have the same credit quality category (either credit quality step 1 to 3 or credit quality step 4 to 6); otherwise it shall be equal to 50 %; for the purposes of that calculation, bucket 1 shall be considered as belonging to the same credit quality category as buckets that have credit quality step 1 to 3;

• (b) 1, where either bucket b or c is bucket 18;

• (c) 1, where bucket b or c is bucket 19 and the other bucket has credit quality step 1 to 3; otherwise it shall be equal to 50 %;

• (d) 1, where bucket b or c is bucket 20 and the other bucket has credit quality step 4 to 6; otherwise it shall be equal to 50 %;

γbc

^(sector) shall be equal to 1 where the two buckets belong to the same sector, and otherwise shall be equal to the corresponding percentage set out in Table 5:

Table 5

| Bucket | 1, 2 and 11 | 3 and 12 | 4 and 13 | 5 and 14 | 6 and 15 | 7 and 16 | 8 and 17 | 9 and 10 | 18 | 19 | 20 |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 1, 2 and 11 | | 75 % | 10 % | 20 % | 25 % | 20 % | 15 % | 10 % | 0 % | 45 % | 45 % | | 3 and 12 | | | 5 % | 15 % | 20 % | 15 % | 10 % | 10 % | 0 % | 45 % | 45 % | | 4 and 13 | | | | 5 % | 15 % | 20 % | 5 % | 20 % | 0 % | 45 % | 45 % | | 5 and 14 | | | | | 20 % | 25 % | 5 % | 5 % | 0 % | 45 % | 45 % | | 6 and 15 | | | | | | 25 % | 5 % | 15 % | 0 % | 45 % | 45 % | | 7 and 16 | | | | | | | 5 % | 20 % | 0 % | 45 % | 45 % | | 8 and 17 | | | | | | | | 5 % | 0 % | 45 % | 45 % | | 9 and 10 | | | | | | | | | 0 % | 45 % | 45 % | | 18 | | | | | | | | | | 0 % | 0 % | | 19 | | | | | | | | | | | 75 % | | 20 | | | | | | | | | | | |

Article 325ak

Risk weights for credit spread risk for securitisations included in the ACTP

Risk weights for the sensitivities to credit spread risk factors for securitisations included in the ACTP risk factors shall be the same for all maturities (0,5 years, 1 year, 3 years, 5 years, 10 years) within each bucket and shall be specified for each bucket in Table 6 pursuant to the delegated act referred to in Article 461a:

Table 6

Bucket number	Credit quality	Sector	Risk weight
1	All	Central government, including central banks, of Member States	4,0 %
2	Credit quality step 1 to 10	Central government, including central banks, of a third country, multilateral development banks and international organisations referred to in Article 117(2) or Article 118	4,0 %
3	Credit quality step 1 to 10	Regional or local authority and public sector entities	4,0 %
4	Credit quality step 1 to 10	Financial sector entities including credit institutions incorporated or established by a central government, a regional government or a local authority and promotional lenders	8,0 %
5	Credit quality step 1 to 10	Basic materials, energy, industrials, agriculture, manufacturing, mining and quarrying	5,0 %
6	Credit quality step 1 to 10	Consumer goods and services, transportation and storage, administrative and support service activities	4,0 %
7	Credit quality step 1 to 10	Technology, telecommunications	3,0 %
8	Credit quality step 1 to 10	Health care, utilities, professional and technical activities	2,0 %
9	Credit quality step 1 to 10	Covered bonds issued by credit institutions established in Member States	3,0 %
10	Credit quality step 1 to 10	Covered bonds issued by credit institutions in third countries	6,0 %
11	Credit quality step 11 to 17	Central government, including central banks, of a third country, multilateral development banks and international organisations referred to in Article 117(2) or Article 118	13,0 %
12	Credit quality step 11 to 17	Regional or local authority and public sector entities	13,0 %
13	Credit quality step 11 to 17	Financial sector entities, including credit institutions incorporated or established by a central government, a regional government or a local authority, promotional lenders and covered bonds	16,0 %
14	Credit quality step 11 to 17	Basic materials, energy, industrials, agriculture, manufacturing, mining and quarrying	10,0 %
15	Credit quality step 11 to 17	Consumer goods and services, transportation and storage, administrative and support service activities	12,0 %
16	Credit quality step 11 to 17	Technology, telecommunications	12,0 %
17	Credit quality step 11 to 17	Health care, utilities, professional and technical activities	12,0 %
18	Other sector	Other sector	13,0 %

For the purposes of this Article, an exposure shall be assigned the credit quality category corresponding to the credit quality category that it would be assigned under the standardised approach for credit risk set out in Title II, Chapter 2.

By way of derogation from the second paragraph, institutions may assign a risk exposure of an unrated covered bond to bucket 4 where the institution that issues the covered bond has a credit quality step 1 to 3.

Article 325al

Correlations for credit spread risk for securitisations included in the ACTP

l shall be derived in accordance with Article 325ai, except that, for the purposes of this paragraph, ρk l ^(basis) shall be equal to 1 where the two sensitivities are related to the same curves, otherwise it shall be equal to 99,00 %.

2. The correlation γb

c shall be derived in accordance with Article 325aj.

Article 325am

Risk weights for credit spread risk for securitisations not included in the ACTP

1. Risk weights for the sensitivities to credit spread risk factors for securitisation not included in the ACTP shall be the same for all maturities (0,5 years, 1 year, 3 years, 5 years, 10 years) within each bucket in Table 7 and shall be specified for each bucket in Table 7 pursuant to the delegated act referred to in Article 461a:

Table 7

Bucket number	Credit quality	Sector	Risk weight
1	Senior and credit quality step 1 to 10	RMBS — Prime	0,9 %
2	Senior and credit quality step 1 to 10	RMBS — Mid-Prime	1,5 %
3	Senior and credit quality step 1 to 10	RMBS — Sub-Prime	2,0 %
4	Senior and credit quality step 1 to 10	CMBS	2,0 %
5	Senior and credit quality step 1 to 10	Asset backed securities (ABS) — Student loans	0,8 %
6	Senior and credit quality step 1 to 10	ABS — Credit cards	1,2 %
7	Senior and credit quality step 1 to 10	ABS — Auto	1,2 %
8	Senior and credit quality step 1 to 10	Collateralised loan obligations (CLO) non-ACTP	1,4 %
9	Non-senior and credit quality step 1 to 10	RMBS — Prime	1,125 %
10	Non-senior and credit quality step 1 to 10	RMBS — Mid-Prime	1,875 %
11	Non-senior and credit quality step 1 to 10	RMBS — Sub-Prime	2,5 %
12	Non-senior and credit quality step 1 to 10	CMBS	2,5 %
13	Non-senior and credit quality step 1 to 10	ABS — Student loans	1 %
14	Non-senior and credit quality step 1 to 10	ABS — Credit cards	1,5 %
15	Non-senior and credit quality step 1 to 10	ABS — Auto	1,5 %
16	Non-senior and credit quality step 1 to 10	CLO non-ACTP	1,75 %
17	Credit quality step 11 to 17 and unrated	RMBS — Prime	1,575 %
18	Credit quality step 11 to 17 and unrated	RMBS — Mid-Prime	2,625 %
19	Credit quality step 11 to 17 and unrated	RMBS — Sub-Prime	3,5 %
20	Credit quality step 11 to 17 and unrated	CMBS	3,5 %
21	Credit quality step 11 to 17 and unrated	ABS — Student loans	1,4 %
22	Credit quality step 11 to 17 and unrated	ABS — Credit cards	2,1 %
23	Credit quality step 11 to 17 and unrated	ABS — Auto	2,1 %
24	Credit quality step 11 to 17 and unrated	CLO non-ACTP	2,45 %
25	Other sector	Other sector	3,5 %

3. For the purposes of this Article, an exposure shall be assigned the credit quality category corresponding to the credit quality category that it would be assigned under the External Rating Based Approach set out in Title II, Chapter 5.

Article 325an

Intra-bucket correlations for credit spread risk for securitisations not included in the ACTP

l shall be set as follows:

ρkl = ρkl ^(tranche) · ρkl ^(tenor) · ρkl ^(basis)

where:

ρkl ^(tranche) shall be equal to 1 where the two names of sensitivities k and l are within the same bucket and are related to the same securitisation tranche (more than 80 % overlap in notional terms), otherwise it shall be equal to 40 %;

ρkl ^(tenor) shall be equal to 1 where the two vertices of the sensitivities k and l are identical, otherwise it shall be equal to 80 %; and

ρkl ^(basis) shall be equal to 1 where the two sensitivities are related to the same curves, otherwise it shall be equal to 99,90 %.

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Article 325ao

Correlations across buckets for credit spread risk for securitisations not included in the ACTP

c shall apply to the aggregation of sensitivities between different buckets and shall be set at 0 %.

2. The own funds requirement for bucket 25 shall be added to the overall risk class level capital, with no diversification or hedging effects recognised with any other bucket.

Article 325ap

Risk weights for equity risk

1. Risk weights for the sensitivities to equity and equity repo rate risk factors shall be specified for each bucket in Table 8 pursuant to the delegated act referred to in Article 461a:

Table 8

Bucket number	Market capitali-sation	Economy	Sector	Risk weight for equity spot price	Risk weight for equity repo rate
1	Large	Emerging market economy	Consumer goods and services, transportation and storage, administrative and support service activities, healthcare, utilities	55 %	0,55 %
2	Large	Emerging market economy	Telecommunications, industrials	60 %	0,60 %
3	Large	Emerging market economy	Basic materials, energy, agriculture, manufacturing, mining and quarrying	45 %	0,45 %
4	Large	Emerging market economy	Financials including government-backed financials, real estate activities, technology	55 %	0,55 %
5	Large	Advanced economy	Consumer goods and services, transportation and storage, administrative and support service activities, healthcare, utilities	30 %	0,30 %
6	Large	Advanced economy	Telecommunications, industrials	35 %	0,35 %
7	Large	Advanced economy	Basic materials, energy, agriculture, manufacturing, mining and quarrying	40 %	0,40 %
8	Large	Advanced economy	Financials including government-backed financials, real estate activities, technology	50 %	0,50 %
9	Small	Emerging market economy	All sectors described under bucket numbers 1, 2, 3 and 4	70 %	0,70 %
10	Small	Advanced economy	All sectors described under bucket numbers 5, 6, 7 and 8	50 %	0,50 %
11	Other sector	Other sector	Other sector	70 %	0,70 %
12	Large market cap, advanced economy indices	Large market cap, advanced economy indices	Large market cap, advanced economy indices	15 %	0,15 %
13	Other indices	Other indices	Other indices	25 %	0,25 %

EBA shall submit those draft regulatory technical standards to the Commission by 28 June 2021.

Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

4. When assigning a risk exposure to a sector, institutions shall rely on a classification that is commonly used in the market for grouping issuers by sector. Institutions shall assign each issuer to one of the sector buckets in Table 8 and shall assign all issuers from the same industry to the same sector. Risk exposures from any issuer that an institution cannot assign to a sector in such a manner shall be assigned to bucket 11 in Table 8. Multinational or multi-sector equity issuers shall be assigned to a particular bucket on the basis of the most material region and sector in which the equity issuer operates.

Article 325aq

Intra-bucket correlations for equity risk

• (a) 15 % between two sensitivities within the same bucket that fall under the category large market capitalisation, emerging market economy (bucket number 1, 2, 3 or 4);

• (b) 25 % between two sensitivities within the same bucket that fall under the category large market capitalisation, advanced economy (bucket number 5, 6, 7 or 8);

• (c) 7,5 % between two sensitivities within the same bucket that fall under the category small market capitalisation, emerging market economy (bucket number 9);

• (d) 12,5 % between two sensitivities within the same bucket that fall under the category small market capitalisation, advanced economy (bucket number 10);

• (e) 80 % between two sensitivities within the same bucket that fall under either index bucket (bucket number 12 or 13).

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Article 325ar

Correlations across buckets for equity risk

The correlation parameter γbc shall apply to the aggregation of sensitivities between different buckets.

It shall be set in relation to the buckets of Table 8 in Article 325ap as follows:

• (a) 15 % where the two buckets fall within bucket numbers 1 to 10;

• (b) 0 % where either of the two buckets fall within bucket number 11;

• (c) 75 % where the two buckets fall within bucket number 12 and 13;

- (d) 45 % otherwise.

Article 325as

Risk weights for commodity risk

Risk weights for sensitivities to commodity risk factors shall be the following:

Table 9

| Bucket number | Bucket name | Risk weight |

| --- | --- | --- | | 1 | Energy — solid combustibles | 30 % | | 2 | Energy — liquid combustibles | 35 % | | 3 | Energy — electricity | 60 % | | | | | | 3a | Energy — EU ETS carbon trading | 40 % | | 3b | Energy — non-EU ETS carbon trading | 60 % | | | | | | 4 | Freight | 80 % | | 5 | Metals — non-precious | 40 % | | 6 | Gaseous combustibles | 45 % | | 7 | Precious metals (including gold) | 20 % | | 8 | Grains and oilseed | 35 % | | 9 | Livestock and dairy | 25 % | | 10 | Softs and other agricultural commodities | 35 % | | 11 | Other commodities | 50 % |

Article 325at

Intra-bucket correlations for commodity risk

l between two sensitivities WSk and WSl within the same bucket shall be set as follows:

ρkl = ρkl ^(commodity) · ρkl ^(tenor) · ρkl ^(basis)

where:

ρkl ^(commodity) shall be equal to 1 where the two commodities of sensitivities k and l are identical, otherwise it shall be equal to the intra-bucket correlations in Table 10;

ρkl ^(tenor) shall be equal to 1 where the two vertices of the sensitivities k and l are identical, otherwise it shall be equal to 99 %; and

ρkl ^(basis) shall be equal to 1 where the two sensitivities are identical in the delivery location of a commodity, otherwise it shall be equal to 99,90 %.

3. The intra-bucket correlations ρkl

^(commodity) are:

Table 10

Bucket number	Bucket name	Correlation ρkl (commodity)
1	Energy - solid combustibles	55 %
2	Energy - liquid combustibles	95 %
3	Energy - electricity and carbon trading	40 %
4	Freight	80 %
5	Metals – non-precious	60 %
6	Gaseous combustibles	65 %
7	Precious metals (including gold)	55 %
8	Grains and oilseed	45 %
9	Livestock and dairy	15 %
10	Softs and other agricultural commodities	40 %
11	Other commodity	15 %

• (a) two risk factors that are allocated to bucket 3 in Table 10 and that concern electricity which is generated in different regions or is delivered at different periods under the contractual agreement shall be considered distinct commodity risk factors;

- (b) two risk factors that are allocated to bucket 4 in Table 10 and that concern freight where the freight route or week of delivery differ shall be considered distinct commodity risk factors.

Article 325au

Correlations across buckets for commodity risk

The correlation parameter γb c applying to the aggregation of sensitivities between different buckets shall be set at:

• (a) 20 % where the two buckets fall within bucket numbers 1 to 10;

- (b) 0 % where either of the two buckets is bucket number 11.

Article 325av

Risk weights for foreign exchange risk

• (a) the risk weight referred to in paragraph 1, divided by 3;

• (b) the maximum fluctuation within the fluctuation band formally agreed by the Member State and the European Central Bank, if that fluctuation band is narrower than the fluctuation band defined under ERM II.

5. Where the daily exchange-rate data for the preceding three years show that a currency pair composed of euro and a non-euro currency of a Member State is constant and that the institution is always able to face a zero bid/ask spread on the respective trades related to that currency pair, the institution may apply the risk weight referred to in paragraph 1 divided by 2, provided that it has the express permission of its competent authority to do so.

Article 325aw

Correlations for foreign exchange risk

A uniform correlation parameter γb

c equal to 60 % shall apply to the aggregation of sensitivities to foreign exchange risk factors.

Subsection 2 Vega and curvature risk weights and correlations

Article 325ax

Vega and curvature risk weights

2. Risk weights for sensitivities to vega risk factors shall be assigned in accordance with the risk class of the risk factors, as follows:

Table 1

Risk class	Risk weights
GIRR	100 %
CSR non-securitisations	100 %
CSR securitisations (ACTP)	100 %
CSR securitisations (non-ACTP)	100 %
Equity (large cap and indices)	77,78  %
Equity (small cap and other sector)	100 %
Commodity	100 %
Foreign exchange	100 %

6. For general interest rate, credit spread and commodity curvature risk factors, the curvature risk weight shall be the parallel shift of all vertices for each curve on the basis of the highest prescribed delta risk weight referred to in Subsection 1 for the relevant risk bucket.

Article 325ay

Vega and curvature risk correlations

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where:

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shall be equal to

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where α shall be set at 1 %, Tk and Tl shall be equal to the maturities of the options for which the vega sensitivities are derived, expressed as a number of years; and

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is equal to

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, where α is set at 1 %,

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and

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shall be equal to the maturities of the underlyings of the options for which the vega sensitivities are derived, minus the maturities of the corresponding options, expressed in both cases as a number of years.

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where:

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shall be equal to the delta intra-bucket correlation corresponding to the bucket to which vega risk factors k and l would be allocated; and

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shall be set in accordance with paragraph 1.

5. The curvature risk correlations shall be the square of corresponding delta risk correlations ρkl and γbc referred to in Subsection 1.

CHAPTER 1b Alternative internal model approach

Section 1 Permission and own funds requirements

Article 325az

Alternative internal model approach and permission to use alternative internal models

• (a) the trading desks were established in accordance with Article 104b;

• (b) the institution has provided to the competent authority a rationale for the inclusion of the trading desks in the scope of the alternative internal model approach;

• (c) the trading desks have met the back-testing requirements referred to in Article 325bf(3);

• (d) the trading desks have met the profit and loss attribution (‘P&L attribution’) requirements referred to in Article 325bg;

• (e) for trading desks that have been assigned at least one of those trading book positions referred to in Article 325bl, the trading desks fulfil the requirements set out in Article 325bm for the internal default risk model;

• (f) no securitisation or re-securitisation positions have been assigned to the trading desks;

• (g) no positions in CIUs that meet the condition set out in Article 104(8), point (b), have been assigned to the trading desks.

For the purposes of point (b) of the first subparagraph of this paragraph, not including a trading desk in the scope of the alternative internal model approach shall not be motivated by the fact that the own funds requirement calculated under the alternative standardised approach set out in point (a) of Article 325(3) would be lower than the own funds requirement calculated under the alternative internal model approach.

Institutions shall notify the competent authorities of all other extensions and changes to the use of the alternative internal models for which the institution has received permission.

• (a) the conditions for assessing the materiality of extensions and changes to the use of alternative internal models and changes to the subset of the modellable risk factors referred to in Article 325bc;

• (b) the assessment methodology under which competent authorities verify an institution’s compliance with the requirements set out in this Chapter.

EBA shall submit those draft regulatory technical standards to the Commission by 28 June 2024.

Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

For the purpose of providing that opinion, EBA shall monitor the market conditions to assess whether extraordinary circumstances have occurred and, where that is the case, shall notify the Commission immediately.

EBA shall submit those draft regulatory technical standards to the Commission by 30 June 2024.

Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

Article 325ba

Own funds requirements when using alternative internal models

• (a) the sum of the following values:
• (i) the institution's previous day's expected shortfall risk measure, calculated in accordance with Article 325bb (ESt-1), and
• (ii) the institution's previous day's stress scenario risk measure, calculated in accordance with Section 5 (SSt-1); or

• (b) the sum of the following values:
• (i) the average of the institution's daily expected shortfall risk measure, calculated in accordance with Article 325bb for each of the preceding sixty business days (ES^avg), multiplied by the multiplication factor (mc); and
• (ii) the average of the institution's daily stress scenario risk measure, calculated in accordance with Section 5 for each of the preceding sixty business days (SS^avg).

Where calculating the own funds requirements for market risk using an internal model in accordance with the first subparagraph, an institution shall not include its own credit spreads in the calculation of the measures referred to in points (a) and (b) for positions in the institution’s own debt instruments.

• (a) the most recent own funds requirement for default risk, calculated in accordance with Section 3;

• (b) the average of the amount referred to in point (a) over the preceding 12 weeks.

By way of derogation from the first subparagraph, an institution shall not be subject to the additional own funds requirement for the holdings of its own debt instruments.

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where:

• AIMA = the sum of the own funds requirements referred to in paragraphs 1 and 2;

• PLAaddon = the additional own funds requirement referred to in Article 325bg(2);

• ASAnon–aima = the own funds requirements for market risk as calculated under the alternative standardised approach referred to in Article 325(1), point (a), for the portfolio of trading book positions and non-trading book positions generating foreign exchange risk or commodity risk for which the institution uses the alternative standardised approach to calculate the own funds requirements for market risk;

• ASAall portofolio = the own funds requirements for market risk as calculated under the alternative standardised approach referred to in Article 325(1), point (a), for the portfolio of all trading book positions and all non-trading book positions generating foreign exchange risk or commodity risk;

- ASAaima = the own funds requirements for market risk as calculated under the alternative standardised approach referred to in Article 325(1), point (a), for the portfolio of trading book positions and non-trading book positions generating foreign exchange risk or commodity risk for which the institution uses the approach referred to in Article 325(1), point (b), to calculate the own funds requirements for market risk.

Section 2 General requirements

Article 325bb

Expected shortfall risk measure

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where:

ESt	=	the expected shortfall risk measure;
---	---	---
i	=	the index that denotes the five broad categories of risk factors listed in the first column of Table 2 of Article 325bd;
---	---	---
UESt	=	the unconstrained expected shortfall measure calculated as follows: Image omitted; see official source
---	---	---
Image omitted; see official source	=	the unconstrained expected shortfall measure for broad risk factor category i and calculated as follows: Image omitted; see official source ρ = the supervisory correlation factor across broad categories of risk; ρ = 50 %; Image omitted; see official source = the partial expected shortfall measure that shall be calculated for all the positions in the portfolio in accordance with Article 325bc(2); Image omitted; see official source = the partial expected shortfall measure that shall be calculated for all the positions in the portfolio in accordance with Article 325bc(3); Image omitted; see official source = the partial expected shortfall measure that shall be calculated for all the positions in the portfolio in accordance with Article 325bc(4);
---	---	---
Image omitted; see official source	=	the partial expected shortfall measure for broad risk factor category i that shall be calculated for all the positions in the portfolio in accordance with Article 325bc(2);
---	---	---
Image omitted; see official source	=	the partial expected shortfall measure for broad risk factor category i that shall be calculated for all the positions in the portfolio in accordance with Article 325bc(3); and
---	---	---
Image omitted; see official source	=	the partial expected shortfall measure for broad risk factor category i that shall be calculated for all the positions in the portfolio in accordance with of Article 325bc(4).

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and of the partial expected shortfall measures

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,

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and

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for all broad risk factor categories i from daily to weekly, provided that both of the following conditions are met:

• (a) Image omitted; see official source

- (b) Image omitted; see official source

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Article 325bc

Partial expected shortfall calculations

• (a) daily calculations of the partial expected shortfall measures;

• (b) at 97,5th percentile, one tailed confidence interval;

• (c) for a given portfolio of trading book positions and non-trading book positions that are subject to foreign exchange or commodity risk, institutions shall calculate the partial expected shortfall measure at time ‘t’ in accordance with the following formula: Image omitted; see official source where: PESt = the partial expected shortfall measure at time t; j = the index that denotes the five liquidity horizons listed in the first column of Table 1; LHj = the length of liquidity horizons j as expressed in days in Table 1; T = the base time horizon, where T = 10 days; PESt(T) = the partial expected shortfall measure that is determined by applying scenarios of future shocks with a 10-day time horizon only to the specific set of modellable risk factors of the positions in the portfolio set out in paragraphs 2, 3 and 4 for each partial expected shortfall measure referred to in Article 325bb(1); and PESt(T, j) = the partial expected shortfall measure that is determined by applying scenarios of future shocks with a 10-day time horizon only to the specific set of modellable risk factors of the positions in the portfolio set out in paragraphs 2, 3 and 4 for each partial expected shortfall measure referred to in Article 325bb(1) and of which the effective liquidity horizon, as determined in accordance with Article 325bd(2), is equal or longer than LHj.

Table 1 Liquidity horizon j Length of liquidity horizon j (in days) 1 10 2 20 3 40 4 60 5 120

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and

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referred to in Article 325bb(1), in addition to the requirements set out in paragraph 1 of this Article, institutions shall meet the following requirements:

• (a) Image omitted; see official source Image omitted; see official source An institution that no longer meets the requirement referred to in the first paragraph of this point shall immediately notify the competent authorities thereof and shall update the subset of the modellable risk factors within two weeks in order to meet that requirement; where, after two weeks, that institution has failed to meet that requirement, the institution shall revert to the approach set out in Chapter 1a to calculate the own funds requirements for market risk for some trading desks, until that institution is able to demonstrate to the competent authority that it is meeting the requirement set out in the first subparagraph of this point;

• (b) Image omitted; see official source

• (c) Image omitted; see official source

• (d) Image omitted; see official source

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and

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referred to in Article 325bb(1), institutions shall, in addition to the requirements set out in paragraph 1 of this Article, meet the following requirements:

• (a) Image omitted; see official source

• (b) Image omitted; see official source

• (c) the data inputs used to determine the scenarios of future shocks applied to the modellable risk factors referred to in points (a) and (b) of this paragraph shall be calibrated to historical data referred to in point (c) of paragraph 4; those data shall be updated on at least a monthly basis.

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and

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referred to in Article 325bb(1), institutions shall, in addition to the requirements set out in paragraph 1 of this Article, meet the following requirements:

• (a) Image omitted; see official source

• (b) Image omitted; see official source

• (c) the data inputs used to determine the scenarios of future shocks applied to the modellable risk factors referred to in points (a) and (b) shall be calibrated to historical data from the preceding 12-month period; where there is a significant upsurge in the price volatility of a material number of modellable risks factors of an institution's portfolio which are not in the subset of the risk factors referred to in point (a) of paragraph 2, competent authorities may require an institution to use historical data for a period shorter than the preceding 12-months, but such a shorter period shall not be shorter than the preceding six-months; competent authorities shall notify EBA of any decision to require an institution to use historical data from a shorter period than 12 months and shall substantiate that decision.

EBA shall submit those draft regulatory technical standards to the Commission by 10 January 2026.

Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

Article 325bd

Liquidity horizons

An institution shall notify the competent authorities of the trading desks and the broad sub-categories of risk factors to which it decides to apply the treatment referred to in the first subparagraph.

EffectiveLH =	Image omitted; see official source	SubCatLH if Mat > LH5
EffectiveLH =	Image omitted; see official source	min (SubCatLH, minj{LHj/LHj ≥ Mat}) if LH1 ≤ Mat ≤ LH5
EffectiveLH =	Image omitted; see official source	LH1 if Mat < LH1

where:

EffectiveLH	=	the effective liquidity horizon;
---	---	---
Mat	=	the maturity of the trading book position;
---	---	---
SubCatLH	=	the length of liquidity horizon of the modellable risk factor determined in accordance with paragraph 1; and
---	---	---
minj {LHj/LHj ≥ Mat}	=	the length of one of the liquidity horizons listed in Table 1 of Article 325bc which is the nearest liquidity horizon above the maturity of the trading book position.