Response to cP on EBA launches consultation on technical standards on the standardised approach for counterparty credit risk

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Which one of the three options (option 4a: 1 bp, option 4b: 0.1% or option 4c: 1%) do you think is more appropriate as a threshold? Please provide the rationale for the chosen option.

Even though setting lambda as low as possible (1bp) might seem at first sight to minimize distortions, quantitative assessment performed by banks shows that actual results depend on the features of a bank’s instruments and portfolios (e.g. well-hedged vs directional portfolios) and that in some cases a higher threshold could be preferable.
Therefore, in ABI’s opinion it would be worth that the EBA assessed the impact of the different thresholds on real portfolios before setting the final threshold. The industry remains available to contribute to such exercise.

Please provide examples of cases where the possibility to set the shift ? according to the prevalent market conditions (option 4) might: - provide some benefits - raise some concerns

(No response provided).

Do you consider necessary an adjustment to the supervisory volatility parameter ? as defined in Article 5? In the case an adjustment is considered necessary, how should it be carried out?

ABI agrees that an adjustment to the supervisory volatility parameter σ is needed.
In principle, a specific adjustment should be determined for each transaction. Anyway, ABI is concerned that this would further raise the complexity in the calculation of the supervisory delta. In ABI’s opinion a solution implying a lower operational challenge for banks would be preferable.
All in all, the fixed 50% supervisory volatility proposed by the EBA seems to represent a good compromise and therefore ABI agrees with EBA proposal set in Article 5 of the draft RTS.

Do you think the specified method for determining whether a transaction is a long or short position in a material risk driver is adequate? If not, please provide an explanation.

ABI considers the approach proposed in Article 6 of the draft RTS as adequate. Using sensitivities – as per draft Article 6 (a) - seems reasonable and sound; analysis performed by banks on real portfolios shows that the outcomes of this approach are consistent.
ABI also welcomes the provision of alternative solutions for banks not required to compute FRTB sensitivities, as per draft Article 6 (b).

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Name of organisation

Italian Banking Association