Response to consultation on draft Regulatory Technical Standards (RTS) on prudent valuation

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Do you agree with the approaches defined above to calculate AVAs for market price uncertainty, close-out costs, and unearned credit spreads? If not, what other approach could be prescribed? State your reasons.

Yes in theory but the compliance time costs are likely to be quite high for the core approach and there are likely to be multiple approaches by banks to the calculations – so even for the same assets could be bank A having a different AVA than Bank B

Do you agree with our analysis of the impact of the proposals in this CP? If not, can you provide any evidence or data that would explain why you disagree or might further inform our analysis of the likely impacts of the proposals?

The core approach is quite complicated, data intensive and subject to a lot of potential management judgements. Standard financial and risk reporting do not naturally produce information in the form envisaged by the QIS and will require almost 1005 manual intervention

A simpler, if somewhat cruder approach would be along the lines of the simplified approach with a bigger threshold applied. This would also reduce the management judgement element and allow better comparability across institutions
The use of article 34 to apply to non-trading assets i.e. banking book AFS assets is a new development which certainly for sovereigns is inconsistent with the proposed sovereign filter for AFS reserve (up to 1 Jan 2017) . The AVA approach where there are concentration risks in the peripheral banks on domestic sovereigns is likely to result in a not immaterial capital write-down and reduce demand for peripheral sovereign debt

Name of organisation

ALLIED IRISH BANKS DUBLIN