Regulatory Technical Standards on the assessment methodology to verify an institution’s compliance with the internal model approach

The Regulatory Technical Standards (RTS) on the assessment methodology under which competent authorities verify an institution’s compliance with the internal models under the Fundamental Review of the Trading Book (FRTB) rules are part of of the EBA roadmap for the new market and counterparty credit risk approaches. These RTS ensure clarity on the assessment performed by competent authorities, so as to guide the implementation of FRTB internal models in EU. In particular, these draft RTS set out a framework for competent authorities to assess these requirements and focus on three main aspects: governance, the internal risk-measurement model - covering the expected shortfall, and the stress scenario risk measure -  and the internal default risk model.