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

Go back

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.

We have not yet been able to accurately assess the impact on the exposure value resulting from the SA-CCR due to different thresholds. As the impact will likely vary from institution to institution, the threshold should, if possible, be chosen by the institution itself. In this case, too, the threshold should be fixed once only and notified to supervisors so as to avoid cherry picking.
Which is the preferred option depends, in our view, also on whether the lambda is applied at transaction or currency level. If it was applied at currency level, a higher threshold would be useful to serve as a buffer to prevent frequent lambda resetting and resulting instability (see our reply to Q3).
However, as we prefer application of the lambda at transaction level, we generally support – in line with our reasoning in response to Q3 – the EBA’s argument that the distortion accompanying computation should be minimised, which suggests as low a threshold as possible. This is illustrated by an example on page 45 of the consultation paper and is correct for the example in question. Yet, in our view, it is not completely clear whether this finding can be generalised. In particular, a correct delta will often not be available as a benchmark in practice. Further cases should therefore first be examined to determine which threshold would cause the least distortion.

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

NA

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?

NA

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.

The condition reading “where institutions apply the approach set out in Article 3(1)(a)” to determine long or short positions by assessing the cash flow or hedging purpose of the transaction should be deleted. Otherwise, the current wording means that FRTB sensitivities would have to be used for all other cases. Application of this method appears to us, firstly, to be excessive in cases where there is only one material risk driver pursuant to Article 1 and the transaction was unambiguously mapped to a risk category. Secondly, cases where the method set out in Article 3(2) (mapping based on SA-CCR add-ons) is applied would not be covered. It must be ensured that application of the method provided for under Article 6(b) is possible also in such cases.

Upload files

Name of organisation

German Banking Industry Committee