Response to consultation on amending ITS on benchmarking exercises
MR Q1: Do you see any issues or any missing information that should be required in the new templates suggested for the AIMA FRTB benchmarking exercise (i.e. Annex 6 & 7)?
Response:
Template 108 requires 10d P&Ls and references 130.05. However, template 130.05 requires 1d P&Ls. This discrepancy should be reviewed and resolved.
MR Q2: Do you see any issues with the reduced subset of instruments proposed for the AIMA exercise? Please elaborate?
Response:
Whilst the industry welcomes the reduced scope that the EBA is proposing for the HPE portfolios and instruments for the AIMA exercise, it would like to restate point raised in the consultation response last year that the significantly reduced participation AIMA Benchmarking post FRTB go-live could be lower than the number required to support a meaningful benchmarking exercise and production of results.
Furthermore, given the large operational burden for the firms opting to support the AIMA benchmarking exercise with the likely probability of no results/feedback forthcoming the industry would suggest that the EBA take the approach in the consultation last year to start with have a stepwise approach in Asset Classes and start with IR and FX for 2026.
The industry would like to point out that in the reduced set that has been proposed there are instruments that contain non-standard features as well as otherwise problematic trades. Specifically in the Interest Rate Asset Class instrument 204 has shown higher volatility in the past benchmarking results compared to other IR instruments and instrument 205 is a non-standard instrument. The industry would propose removing non-standard instruments from the definition and replacing with a more vanilla instrument, e.g. instrument 207 long German Government bond instrument. In the FX asset class instrument 303 a cash position has very little value as a standalone portfolio.
MR Q3: Do you see any issues with the new template 106.02? Please elaborate.
Response:
The portfolios are defined in Annex X of last years’ exercise. With new banks entering the scope we propose Annex X to be republished.
There are inconsistencies in the definition of portfolios as published last year which should be reviewed and resolved. These include
- Portfolios F007 & F023 both contain instrument “S_FXD_e1#”, however there is no such instrument identifier on the “Instruments”.
- Inconsistent approach in definition of curvature sensitivity inputs, e.g. Portfolio C080 is defined referencing the identifiers of 2 S_CMC_a1# input sensitivities (up and down), whereas C062 only references 1 S_CMC_a1# input identifier. In this case it is unclear which should be taken, or if the net value be used or if is this a typo. The definition should be consistent, clear and easy to interpret.
Finally, the industry would like the EBA to clarify the scope of SBM Validation portfolios that a firm is required to submit is restricted to those risk classes and risk components that align to the scope of the firms’ implementation and approved mandates.
MR Q4: Do you see any issues with specifying the specified timeline in the Annex 5 or with the reference date for new ASA institution in the exercise as defined in the suggested draft of Arti-cle 4.1.(b)?
Response:
We propose more time is given between reference dates and remittance dates for all parts of the exercise. As a result of the change in mandate the exercise will be new for all participating firms, either new ASA benchmarking firms or firms benchmarking FRTB-IMA for the first time, and so greater time is required to support internal validation steps.
The time between first reference date and remittance date should remain as per the 2025 exercise as three weeks, not the proposed two weeks. We would propose that the time between (last) reference date and remittance date is increased to 2 months. We would also propose that the submission of SBM validation portfolios is not aligned to the submission of IMV results. Our preference would be to keep the submission as it is currently aligned to the date of the full results, or as near as possible to that.
MR Q5: Do you see any issues with the changes introduced in the Annex 5?
Response:
The current scope definition allows for interpretation and requires more guidance.
The scope is defined via approved IMA desks, cf. below. We seek for guidance whether this considers PLAT results. In other words, the approval could change over time. In such cases we propose to assess approval at a particular date, e.g. IMV reference date and keep the scope fixed afterwards.
‘Institutions in the scope of the ASA submission shall report solely instrument that are not forbidden to trade by internal policy decision or trading system limitations, and Institutions in the scope of the AIMA submission shall report solely instruments that are not forbidden to trade by internal policy decision or trading system limitations and are traded on an AIMA approved desks.'
MR Q6: Would you consider it useful to clarify the type of SOFR rate (term, compound) to be used when booking related interest rate instruments? If so, please suggest a clarification.
Response:
We are supportive of further clarifications and propose to align with industry best practice, i.e. using “overnight SOFR, daily compounded”. This would be useful given the increase in scope of participating firms who are inexperienced in the benchmarking exercise and therefore the greater clarity provided in the definition of the HPE instruments the less likely to see variation from benchmarking process errors coming from booking differences.
CR Q1: Do you think that the proposed approach aimed at including the breakdown B.6.3 is cor-rect and it enables to avoid any double counting of the exposures?
Response:
We would like the EBA to clarify the historical default rate / loss rate of the last 5 years for exposure classes where a change of approach has been experienced during that specific period (A-IRB to F-IRB, for instance). In these specific cases, we consider that a reasonable option in order to avoid excessively burdensome criteria on changes of approach already authorized by the ECB, would be to allow banks to report only the period of time during which the new approach has been applied. Can the EBA confirm this is a valid approach.