Response to consultation on ITS amending Commission Implementing Regulation EU 2016-2070 on Benchmarking

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Do you agree that the combined split of rating and country in template C103 can generally be replaced by a simpler rating split per model (i.e., rating distribution) in template 105, which will cover all models in the scope of the benchmarking exercise (HDP and LDP) without losing explanatory information on the variability of benchmarking parameters? Is there any data point collected in the new template 105.04 that involve significant IT costs or burden and should be dropped?

n.a.

Do you agree that SLE portfolios should be reported in a separate exposure class? Do you agree that the proposed level-2 breakdown on (a) the proposed sectors of counterparties and (b) the proposed types of exposures (i.e. categories of specialized lending) might be relevant components to explain the variability of risk parameters? Which option do you prefer with respect to the rating split under the slotting approach?

n.a.

Do you expect that the LDP sub-portfolio characterized by eligible covered bods will cover a material share of exposure? Do you expect that the separation of these exposures can contribute to explain RWA variability?

n.a.

Do you think the alternative portfolio split would provide for a higher explanatory power as regards RWA variability induced by differences in CRM usage?

n.a.

Do you expect that the proposed NACE Code breakdown for HDP sub-portfolios will provide more explanation for RWA variability for a material share of exposure? Do you expect that the separation of these exposures can contribute to explain RWA variability in the according HDP portfolios or do you consider the current split using only NACE code F sufficient? Does the selection of a subset of NACE codes significantly reduce the burden of the data collection (compared to a comprehensive collection of all NACE codes)?

n.a.

Do you expect that the proposed ILTV buckets for HDP sub-portfolios secured by immovable property will provide more explanation for RWA variability for a material share of exposure? Do you expect that the separation of these exposures can contribute to explain RWA variability in the according HDP portfolios?

n.a.

Do you agree with the Additional pricing information requested? Please, provided detailed explanation for your answer.

The revised proposal requires - according to our understanding - to provide a list of pricing factors used in the PnL system as well as sensitivities based on this setup. Furthermore, a mapping to risk factors used in the risk system shall be delivered.
We assume that delivery of sensitivities (Annex VI, C 111.00) where Risk Factors and Risk Factor 2 refere to shall hold the sensitivities for this price factors.
We would like to express our concern that this additional data request is overly complex and will create significant additional operational burden and will broadly not meet the targets as set out in paragraph 31 to 36. Specifically we have the following remarks to this proposal:
There are operational challenges to provide the additional information of pricing factors and the respective sensitivities given that a very large information set must be delivered in case of an application on trade / instrument level.
Furthermore, the foreseen timeline between IMV measurement- and reporting date is too short. Apart from the calculating efforts in order to extend statutory reporting systems and their interfaces there are as well increased implementation / IT- efforts to be considered and necessary preparation time to be taken into account.
Since setups will significantly differ among Institutions and there is no unique identifier of pricing or risk factors the comparison will be demanding. For this reason, we would recommend to consider the standardized setup of sensitivities within FRTB SA and postpone the introduction to later exercise where FRTB application will be more mature.
Furthermore the additional pricing information data will in general not improve the comparison of VaR variability among institutions because risk factors in VaR often differ from the PnL setup (eg in number, timing, data source) up to difference due to methodological aspects (e.g. usage of spreads or factor representations). Furthermore, VaR volatility conclusion will not be possible because the IMV sensitivities will already be outdated and have changed at the time of VaR reporting.

Do you agree with the simplification introduced in the time setting of the references date for the instruments?

The extended specification of the time setting provides additional clarity. This is true for the newly introduced relative definition as well, which support a continuous use of the instruments.
However, we would appreciate an additional update with concrete dates to avoid potential uncertainties remaining e.g. non-business days.

Do you have any concerns on the clarity of the instructions?

We expressed our understanding on the price and risk factors and the sensitivities to be reported in question 9 above, but different interpretations may be possible and thus additional guidance will be appreciated.
A general topic for an extended guidance is the expected consideration of FX risk including treatment of past cash-flows.
We would like to question the benefit and necessity of a split into a different standard intended for IMV purposes and different amounts in the VaR portfolio calculation.

Can you please provided detailed explanation of the instruments that are not clear and a way to clarify the description?

As mentioned in question 11 extended guidance on the expected consideration of FX risk including past cash-flows would be appreciated.

Name of organisation

Austrian Economic Chamber, Division Bank and Insurance