Basel 2.5 Model Approval in Germany

Size: px
Start display at page:

Download "Basel 2.5 Model Approval in Germany"

Transcription

1 Basel 2.5 Model Approval in Germany Ingo Reichwein Q RM Risk Modelling Department Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin)

2 Session Overview 1. Setting Banks, Audit Approach 2. Results IRC 3. Results CRM 4. Results Stress VaR

3 Session Overview 1. Setting Banks, Audit Approach 2. Results IRC 3. Results CRM 4. Results Stress VaR

4 Basel 2.5: Specific Interest Rate Risk Trading book portfolios plain vanilla credit trading products (contains no correlation risk, no securitizations or ntd) Calculation Method VaR svar IRC CRM SA X X X securitizations and ntd not eligible for CTP (X) (X) X CTP CRM securitizations and ntd X X X other financial instruments X X (X) X SA securitizations and ntd (X) (X) X other financial instruments X X X X Abbreviations: X / (X) mandatory/optional waiver optional (partial use) VaR : value-at-risk IRC : incremental risk charge CTP : correlation trading portfolio svar : stressed VaR CRM : comprehensive risk measure SA : standard approach

5 Market Risk Models in Germany Before 2012 After Basel 2.5 Banks with model approval Interest Rate Risk general specific 7 6 Equity Risk general specific FX 9 9 Commodities 6 6 IRC Banks Plus two CRM approaches Banks with VaR (1-day/99%) ranging from 1 to 80 million EUR

6 On-site Examinations On-site examinations to assess IRC and CRM approaches Audit assignment (BaFin mandates Deutsche Bundesbank) Definition of audit scope, preparation through supervisory meeting ( pre-visit ) Writing decree of examination to the bank Sending letter of audit assignment to Deutsche Bundesbank On-site examination by Deutsche Bundesbank Deutsche Bundesbank writes examination report Final assessment Request and analysis of bank's written comments (hearing) Assessment of audit findings and preparation of the administrative act (approval, sanctions, qualitative factor, terms and conditions) Tracking (findings, terms and conditions)

7 Statistics: On-site inspections Basel 2.5 IRC Weeks (on-site) Examinors Bank Bank 2 term term Bank 3 9 9* Bank Bank Bank Bundesbank spent approx. 300 man weeks on-site Extent determined by bank s complexity *not all examinors were on-site all the time Earliest start date: Jun 2010 CRM Weeks (on-site) Examinors Latest end date: Sep 2011 Bank Bank *

8 Session Overview 1. Setting Banks, Audit Approach 2. Results IRC 3. Results CRM 4. Results Stress VaR

9 IRC requirements Mandatory for preliminary approval Primary focus of on-site examinations Complete and adequate capturing of credit exposure positions Appropriate stochastic modeling, one-year-horizon, 99.9% probability Default and migration risks (e. g. probabilities) Appropriate parameterization (e. g. segmentation, correlation) Qualified model validation Not mandatory for preliminary approval Integration into risk management processes (Use Test) Reporting Limitation Not in focus

10 Capturing of Positions Findings caused by ambiguous rules text positions in institution s own debt Clarification by EBA guideline on IRC expected positions in sovereign bonds (should be included) Findings caused by the requirement to exclude securitizations detecting and excluding securitizations and ntd s was difficult data enrichment needed Other Findings caused by new interfaces and processes (e. g. update and review of relevant parameters to identify ntd s)

11 IRC Model in a Nutshell 1. Factor Model 2. Migration Matrix 3. Valuation All German banks are basically using the same factor model approach! Differences: choice of factors, calibration, valuation

12 systemic factor idiosyncratic factor Factor Model Choice of factors position sector intra-sector issuer asset correlation often similar to S&P Credit Pro segmentation only few findings: inappropriate choice of factors (e. g. not all available information used, bank could not justify simplification) Calibration of factor model (inter and intra sector correlations) All German banks use Gaussian Copula! Variety of approaches, from pure reliance on default and migration time series to a mixture of equity time series (for fine tuning) and default time series (for the level), but no pure reliance on equity time series for both (inter- and intra-sector correlations) additionally reliance on IRB parameters and expert judgment

13 Factor Model Findings regarding the calibration of factor model Weaknesses in all approaches detected Caused by requirement to base the calibration on observable market data (e. g. justification needed for expert judgment detail) Representativeness of market data for banks portfolio Appropriateness of mixture approaches (How to combine different data?) Example based on pure default and migration calibration Pairwise asset correlations difficult to compare (among banks) due to different choice of factors inter-sector correlation * intra-sector correlation = pairwise correlation

14 Migration Matrix Example: Extract of an migration matrix based on Moodys S&P data (1 year migration probabilities) Bank s approaches Estimation based on data bases (Moody s DRS or S&P Credit Pro) Example: Lando (2002) Direct usage of published matrices Scaling by matrix generator Findings Representativeness of market data for banks portfolio Granularity not appropriate (e. g. no distinction between gov and corp)

15 (Re-)Valuation under Rating Migration Example: Re-Valuation for BBB Instrument Banks approaches All banks use valuation grids Variety of approaches Use of credit spreads (current or mean) Use of default intensities (current or mean) Findings Simplification of valuation approaches Appropriateness of fallback solutions Need for fallback solutions due to lack of market data!

16 (Re-)Valuation under Default Example: Moody s DRS database Bank s approaches Direct usage of Market data (e.g. Markit) Expert judgment or IRB Based on databases Stochastic and deterministic RR Findings Inconsistencies, simplifications Market data is rare, impact on IRC numbers is huge! Appropriateness of fallback solutions

17 Liquidity Horizon Example: 2 Trades, 3m and 6m LH Banks approaches Set everything to 12m Draw correlated factors on 3m bases, replace migrated positions by clones with original rating Possibilities to replace migrated or defaulted positions Same or new issues (same or new idiosyncratic Factor) ->Different level of diversification Reset systematic factors or keep values Findings Medium impact on IRC numbers: 3m->12m means increase of 10 to 20% Liquidity assessment (appropriateness of process) Replacing of positions

18 Validation Banks approaches Analysis of basic model assumptions Sensitivities and scenario analysis (assess impact on IRC numbers) Use of different calibration data to assess model error Use of stress tests to assess appropriateness of IRC numbers (e. g. default of one or two of most important issuers) Findings No validation concept in place Basic model assumptions not validated

19 Use Test Banks approaches Inclusion of IRC numbers in regular reporting Reporting of overall numbers, stand alone numbers for relevant portfolios, stand alone for relevant issuers, contributions No limit setting on IRC numbers so far No Findings Regulatory requirements not fixed yet. Use test not in focus of inspections Deutsche Bundesbank conducted fact finding only

20 Additional Findings Documentation Rating assignment process Insufficient update and review process Appropriateness of fallback solutions Modeling of funds, lack of look-through Assigning a lower rating is not always conservative! Look-through is even more important for IRC!

21 Interesting Issues Loss distribution with one dominating issuer: Error of R² estimation: (mean in red, quantiles (15%, 85%) in green) Impact of rating migration compared to default: 7-20% of IRC number IRC compared to current market risk number (10 day VaR): 2,8-6,5

22 Conclusion (in My Personal View) Many issues with position capturing Can be fixed easily. Major challenges for the implementation of the IRC-model are Insufficient market data for calibration of factor model calibration of recovery rates bond valuation after severe downgrade calibration of rating matrices Model Validation Not easy to solve! no backtesting available, appropriateness of model outcome difficult to assess Alternatives needed like benchmarking, but: All banks are using the same approach!

23 Conclusion (in My Personal View) High capital charge (compared to current market risk), but: Benefit for (daily) risk management under discussion Limitation? Useful supplement to current VaR model with respect to issuer concentration Many issues found, but: Strong dependency on Rating Agencies How can overall model soundness be ensured? Next steps? Regulatory requirements for use test Analyzing strengths and weaknesses of different approaches

24 Session Overview 1. Setting Banks, Audit Approach 2. Results IRC 3. Results CRM 4. Results Stress VaR

25 CRM requirements Mandatory for preliminary approval Primary focus of on-site examinations Complete and adequate capturing of credit exposure positions Appropriate stochastic modeling, one-year-horizon, 99.9% probability All price risks Appropriate parameterization (e. g. segmentation, correlation) Qualified model validation Process to assess eligibility of trades for Correlation Trading Portfolio Regulatory Stress Testing Not in Focus: Standardized Approach (Floor Calculation) Similar to IRC Additional for CRM

26 Process to assess eligibility Two types of criteria: Clear requirements Static (instrument features): Assessed once, stable during lifetime of an instrument Dynamic (liquidity of a trade): Frequent assessment needed Approaches for liquidity assessment: Interpretation necessary Combination of several liquidity reports (e. g. DTCC (American Clearinghouse) quarterly report, Markit CDS liquidity report) and expert judgment Findings Quarterly report requested! Robustness of processes Soundness of criteria, appropriate combination of criteria Short-term nature of assessment, volatile CTP composition

27 CRM Modelling Approaches Correlations: How to aggregate risk factors? Bank 1: Based on existing approaches Historical Correlations Re-Use of path generators from Internal Model Method (IMM) for Counterparty Credit Risk, Risks are Credit Spreads, FX, Interest Rates Uncorrelated (supported by quantitative analysis) Additional risk factors like Base Correlations, Recovery Rates and Index Bases Uncorrelated (supported by quantitative analysis) Bank 2: Re-Use of IRC approach (Extension: Stochastic Recovery Rates) plus Credit Spreads and Base Correlations with Mean Reversion Processes Both banks implemented a modular approach (in line with Basel interpretive issues).

28 CRM Modelling Approaches Findings Simplifications not justified, e. g. Correlation assumptions not sufficiently supported by market data (for some combinations of risk factor classes) Only 5 year credit spreads etc. Missing risk factors (FX and interest rate risk) Inappropriate update frequency of parameters (for the mean reversion processes) Simplifications in pricing models Monte Carlo with full revaluation to fulfill the cross gamma requirement

29 CRM Stress Tests Quarterly report requested! No severe Findings regarding Stress Tests. Both banks implemented regulatory Stress Test (based on Basel Stress Test Guidance). Are the Stress Tests useful to review own fund requirements? Regulatory CTP Extended CTP Credit Risk Balanced date 1 date 2 date 3 date 4 0 date 1 date 2 date 3 date 4 CRM Stress Test CRM Stress Test Most severe regulatory Stress Test compared to CRM risk number (99.9%, 1 Year)

30 Conclusion (in My Personal View) similar to IRC High capital charge (compared to contribution of CTP to VaR model), but: Benefit for (daily) risk management under discussion CTP has extraordinary regulatory attention! Many issues found, but: How can overall model soundness be ensured? Next steps? Follow-up inspections on model validation (including backtesting) Regulatory requirements for use test Analyzing strengths and weaknesses of different approaches

31 Session Overview 1. Setting Banks, Audit Approach 2. Results IRC 3. Results CRM 4. Results Stress VaR

32 Stress VaR requirements No On-site Inspections on Stress VaR so far! Assumption: Risk model at least principally capable of calculating stressed VaR Necessary for the approval: Suitable quantitative process for the choice of the stress period Adequate process for the calculation of the Stress VaR providing proper market data of the stress period Appropriate proxy concept Starting from 2011: Integration of Stress VaR into normal scope of model audit plan Stress VaR subject to routine on-site inspections

33 Lehman- Insolvency svar/var Stress VaR Results Reason for the variation not fully understood Error bars indicate Min/Max in five weeks Observation Period Not acceptable! Bank 11 Bank 10 Bank 9 Bank 8 Bank 7 Bank 6 Bank 5 Bank 4 Bank 3 Bank 2 Bank

34 Stress VaR: Choice of observation period Approaches For Historical Simulation models: Time window that contains the three most severe losses for the current portfolio composition Parametric models: Choose Maximum VaR for historical parameterizations, daily, weekly, monthly, quarterly calculations Two Step approaches Pre-selection of possible time window: Restrict analysis to most important risk factors Take into account all risk factors in the final selection Findings Explored time window to narrow, e. g. restricted to financial crises Missing relation to current portfolio, e.g. simplified portfolio representation But: What should a bank do if 1998 is the most stressful year?

35 Conclusion (in My Personal View) The Stress VaR concept is an appropriate quick fix to the market risk model: Provides persistent memory of critical market situations ->Dampens cyclicality of model based capital requirements Easy and quick implementation But: Lack of market data will increase! No solution yet! Solution could be to do historical model calibration only for systemic risk factors, but: It doesn t get boring! Let s wait for the fundamental review of market risk models

36 The End Thank you for your attention! Contact details: phone:

IRC / stressed VaR : feedback from on-site examination

IRC / stressed VaR : feedback from on-site examination IRC / stressed VaR : feedback from on-site examination EIFR seminar, 7 February 2012 Mary-Cécile Duchon, Isabelle Thomazeau CCRM/DCP/SGACP-IG 1 Contents 1. IRC 2. Stressed VaR 2 IRC definition Incremental

More information

Market Risk Disclosures For the Quarterly Period Ended September 30, 2014

Market Risk Disclosures For the Quarterly Period Ended September 30, 2014 Market Risk Disclosures For the Quarterly Period Ended September 30, 2014 Contents Overview... 3 Trading Risk Management... 4 VaR... 4 Backtesting... 6 Stressed VaR... 7 Incremental Risk Charge... 7 Comprehensive

More information

Market Risk Disclosures For the Quarter Ended March 31, 2013

Market Risk Disclosures For the Quarter Ended March 31, 2013 Market Risk Disclosures For the Quarter Ended March 31, 2013 Contents Overview... 3 Trading Risk Management... 4 VaR... 4 Backtesting... 6 Total Trading Revenue... 6 Stressed VaR... 7 Incremental Risk

More information

Market Risk Capital Disclosures Report. For the Quarterly Period Ended June 30, 2014

Market Risk Capital Disclosures Report. For the Quarterly Period Ended June 30, 2014 MARKET RISK CAPITAL DISCLOSURES REPORT For the quarterly period ended June 30, 2014 Table of Contents Page Part I Overview 1 Morgan Stanley... 1 Part II Market Risk Capital Disclosures 1 Risk-based Capital

More information

Advanced Concepts in Capturing Market Risk: A Supervisory Perspective

Advanced Concepts in Capturing Market Risk: A Supervisory Perspective Advanced Concepts in Capturing Market Risk: A Supervisory Perspective Rodanthy Tzani Federal Reserve Bank of NY The views expressed in this presentation are strictly those of the presenter and do not necessarily

More information

Regulatory Capital Disclosures Report. For the Quarterly Period Ended March 31, 2014

Regulatory Capital Disclosures Report. For the Quarterly Period Ended March 31, 2014 REGULATORY CAPITAL DISCLOSURES REPORT For the quarterly period ended March 31, 2014 Table of Contents Page Part I Overview 1 Morgan Stanley... 1 Part II Market Risk Capital Disclosures 1 Risk-based Capital

More information

Citigroup Inc. Basel II.5 Market Risk Disclosures As of and For the Period Ended December 31, 2013

Citigroup Inc. Basel II.5 Market Risk Disclosures As of and For the Period Ended December 31, 2013 Citigroup Inc. Basel II.5 Market Risk Disclosures and For the Period Ended TABLE OF CONTENTS OVERVIEW 3 Organization 3 Capital Adequacy 3 Basel II.5 Covered Positions 3 Valuation and Accounting Policies

More information

Fundamental Review Trading Books

Fundamental Review Trading Books Fundamental Review Trading Books New perspectives 21 st November 2011 By Harmenjan Sijtsma Agenda A historical perspective on market risk regulation Fundamental review of trading books History capital

More information

Deutsche Bank Annual Report 2017 https://www.db.com/ir/en/annual-reports.htm

Deutsche Bank Annual Report 2017 https://www.db.com/ir/en/annual-reports.htm Deutsche Bank Annual Report 2017 https://www.db.com/ir/en/annual-reports.htm in billions 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Assets: 1,925 2,202 1,501 1,906 2,164 2,012 1,611 1,709 1,629

More information

Risk Modeling: Lecture outline and projects. (updated Mar5-2012)

Risk Modeling: Lecture outline and projects. (updated Mar5-2012) Risk Modeling: Lecture outline and projects (updated Mar5-2012) Lecture 1 outline Intro to risk measures economic and regulatory capital what risk measurement is done and how is it used concept and role

More information

Prudential sourcebook for Investment Firms. Chapter 6. Market risk

Prudential sourcebook for Investment Firms. Chapter 6. Market risk Prudential sourcebook for Investment Firms Chapter Market risk Section.1 : Market risk requirements.1 Market risk requirements.1.1 R IFPRU applies to an IFPRU investment firm, unless it is an exempt IFPRU

More information

Basel II Pillar 3 disclosures

Basel II Pillar 3 disclosures Basel II Pillar 3 disclosures 6M10 For purposes of this report, unless the context otherwise requires, the terms Credit Suisse, the Group, we, us and our mean Credit Suisse Group AG and its consolidated

More information

In various tables, use of - indicates not meaningful or not applicable.

In various tables, use of - indicates not meaningful or not applicable. Basel II Pillar 3 disclosures 2008 For purposes of this report, unless the context otherwise requires, the terms Credit Suisse Group, Credit Suisse, the Group, we, us and our mean Credit Suisse Group AG

More information

Basel II Pillar 3 disclosures 6M 09

Basel II Pillar 3 disclosures 6M 09 Basel II Pillar 3 disclosures 6M 09 For purposes of this report, unless the context otherwise requires, the terms Credit Suisse Group, Credit Suisse, the Group, we, us and our mean Credit Suisse Group

More information

Pillar 3 Regulatory Disclosure (UK) As at 31 December 2012

Pillar 3 Regulatory Disclosure (UK) As at 31 December 2012 Morgan Stanley INTERNATIONAL LIMITED Pillar 3 Regulatory Disclosure (UK) As at 31 December 2012 1 1. Basel II Accord 3 2. Background to Pillar 3 Disclosures 3 3. Application of the Pillar 3 Framework 3

More information

concerning supervisory back-testing of internal market risk models Guidance notice Content 31 July 2014

concerning supervisory back-testing of internal market risk models Guidance notice Content 31 July 2014 (Please note that this is a non-binding English translation of the Merkblatt zu aufsichtlichen Rückvergleichen bei internen Marktrisikomodellen as of 31 July 2014) 31 July 2014 Guidance notice concerning

More information

Supervisory Formula Method (SFM) and Significant Risk Transfer (SRT)

Supervisory Formula Method (SFM) and Significant Risk Transfer (SRT) Financial Services Authority Finalised guidance Supervisory Formula Method and Significant Risk Transfer September 2011 Supervisory Formula Method (SFM) and Significant Risk Transfer (SRT) Introduction

More information

Traded Risk & Regulation

Traded Risk & Regulation DRAFT Traded Risk & Regulation University of Essex Expert Lecture 14 March 2014 Dr Paula Haynes Managing Partner Traded Risk Associates 2014 www.tradedrisk.com Traded Risk Associates Ltd Contents Introduction

More information

Incremental Risk Charge (IRC)

Incremental Risk Charge (IRC) Incremental Risk Charge (IRC) Tom Mills FinPricing http://www.finpricing.com Market Risk Types IRC Definition IRC Scope IRC Main Features Default and Migration Simulation Constant level of risk Implementation

More information

Validation of Nasdaq Clearing Models

Validation of Nasdaq Clearing Models Model Validation Validation of Nasdaq Clearing Models Summary of findings swissquant Group Kuttelgasse 7 CH-8001 Zürich Classification: Public Distribution: swissquant Group, Nasdaq Clearing October 20,

More information

Basel III Pillar 3 disclosures 2014

Basel III Pillar 3 disclosures 2014 Basel III Pillar 3 disclosures 2014 In various tables, use of indicates not meaningful or not applicable. Basel III Pillar 3 disclosures 2014 Introduction 2 General 2 Regulatory development 2 Location

More information

Basel II Pillar 3 disclosures

Basel II Pillar 3 disclosures Basel II Pillar 3 disclosures 6M12 For purposes of this report, unless the context otherwise requires, the terms Credit Suisse, the Group, we, us and our mean Credit Suisse Group AG and its consolidated

More information

Basel Committee on Banking Supervision. Consultative document. Guidelines for Computing Capital for Incremental Risk in the Trading Book

Basel Committee on Banking Supervision. Consultative document. Guidelines for Computing Capital for Incremental Risk in the Trading Book Basel Committee on Banking Supervision Consultative document Guidelines for Computing Capital for Incremental Risk in the Trading Book Issued for comment by 15 October 2008 July 2008 Requests for copies

More information

Market Risk Analysis Volume IV. Value-at-Risk Models

Market Risk Analysis Volume IV. Value-at-Risk Models Market Risk Analysis Volume IV Value-at-Risk Models Carol Alexander John Wiley & Sons, Ltd List of Figures List of Tables List of Examples Foreword Preface to Volume IV xiii xvi xxi xxv xxix IV.l Value

More information

13 January 2012 Mr. Adam Farkas Director General European Banking Authority Tower 42 25 Old Broad Street London EC2N 1HQ United Kingdom Deutsche Bank AG Winchester House 1 Great Winchester Street London

More information

Deutsche Bank s response to the Basel Committee on Banking Supervision consultative document on the Fundamental Review of the Trading Book.

Deutsche Bank s response to the Basel Committee on Banking Supervision consultative document on the Fundamental Review of the Trading Book. EU Transparency Register ID Number 271912611231-56 31 January 2014 Mr. Wayne Byres Secretary General Basel Committee on Banking Supervision Bank for International Settlements Centralbahnplatz 2 Basel Switzerland

More information

In various tables, use of indicates not meaningful or not applicable.

In various tables, use of indicates not meaningful or not applicable. Basel II Pillar 3 disclosures 2012 For purposes of this report, unless the context otherwise requires, the terms Credit Suisse, the Group, we, us and our mean Credit Suisse Group AG and its consolidated

More information

Subject: NVB reaction to BCBS265 on the Fundamental Review of the trading book 2 nd consultative document

Subject: NVB reaction to BCBS265 on the Fundamental Review of the trading book 2 nd consultative document Onno Steins Senior Advisor Prudential Regulation t + 31 20 55 02 816 m + 31 6 39 57 10 30 e steins@nvb.nl Basel Committee on Banking Supervision Uploaded via http://www.bis.org/bcbs/commentupload.htm Date

More information

EUROPEAN COMMISSION Directorate-General for Financial Stability, Financial Services and Capital Markets Union

EUROPEAN COMMISSION Directorate-General for Financial Stability, Financial Services and Capital Markets Union EUROPEAN COMMISSION Directorate-General for Financial Stability, Financial Services and Capital Markets Union DG FISMA CONSULTATION DOCUMENT PROPORTIONALITY IN THE FUTURE MARKET RISK CAPITAL REQUIREMENTS

More information

Statement of Guidance for Licensees seeking approval to use an Internal Capital Model ( ICM ) to calculate the Prescribed Capital Requirement ( PCR )

Statement of Guidance for Licensees seeking approval to use an Internal Capital Model ( ICM ) to calculate the Prescribed Capital Requirement ( PCR ) MAY 2016 Statement of Guidance for Licensees seeking approval to use an Internal Capital Model ( ICM ) to calculate the Prescribed Capital Requirement ( PCR ) 1 Table of Contents 1 STATEMENT OF OBJECTIVES...

More information

Concentration Risk in Credit Portfolios

Concentration Risk in Credit Portfolios Eva Liitkebohmert Concentration Risk in Credit Portfolios With 17 Figures and 19 Tables 4y Springer Contents Part I Introduction to Credit Risk Modeling 1 Risk Measurement 3 1.1 Variables of Risk 4 1.2

More information

Basel 2.5: US Market Risk Final Rule

Basel 2.5: US Market Risk Final Rule June 2012 Financial Services regulatory alert Basel 2.5: US Market Risk Final Rule On 12 June 2012, the Board of Governors of the Federal Reserve System (Federal Reserve Board), the Office of the Comptroller

More information

Stifel Financial Corp. Market Risk Rule Disclosures For the Quarterly Period ended September 30, 2017

Stifel Financial Corp. Market Risk Rule Disclosures For the Quarterly Period ended September 30, 2017 Stifel Financial Corp. Market Risk Rule Disclosures For the Quarterly Period ended September 30, 2017 1 Market Risk Disclosure Overview Stifel Financial Corp. ( SF ) is required to provide this market

More information

The International Swaps and Derivatives Association ( ISDA ), and. The Association of Financial Markets in Europe ( AFME )

The International Swaps and Derivatives Association ( ISDA ), and. The Association of Financial Markets in Europe ( AFME ) The International Swaps and Derivatives Association ( ISDA ), and The Association of Financial Markets in Europe ( AFME ) Response to European Banking Authority ( EBA ) Consultative Papers 48 on Stressed

More information

Stress Testing at the Deutsche Bundesbank

Stress Testing at the Deutsche Bundesbank Stress Testing at the Deutsche Bundesbank Dr. Philipp Koziol* Deutsche Bundesbank Edinburgh, 25th April 2014 * Disclaimer: The presentation represents the author s personal opinion and do not necessarily

More information

Instructions for EBA data collection exercise on CVA

Instructions for EBA data collection exercise on CVA 16 May 2014 Instructions for EBA data collection exercise on CVA Contents 1. Introduction 4 CVA Report CRR Article 456(2) 4 Review and RTS on the application of CVA charges to non-financial counterparties

More information

Razor Risk Market Risk Overview

Razor Risk Market Risk Overview Razor Risk Market Risk Overview Version 1.0 (Final) Prepared by: Razor Risk Updated: 20 April 2012 Razor Risk 7 th Floor, Becket House 36 Old Jewry London EC2R 8DD Telephone: +44 20 3194 2564 e-mail: peter.walsh@razor-risk.com

More information

Regulatory Capital Disclosures

Regulatory Capital Disclosures The Goldman Sachs Group, Inc. Regulatory Capital Disclosures For the period ended December 31, 2013 0 Page Introduction The Goldman Sachs Group, Inc. (Group Inc.) is a leading global investment banking,

More information

Economic Capital Based on Stress Testing

Economic Capital Based on Stress Testing Economic Capital Based on Stress Testing ERM Symposium 2007 Ian Farr March 30, 2007 Contents Economic Capital by Stress Testing Overview of the process The UK Individual Capital Assessment (ICA) Experience

More information

FINANCIAL SERVICES FLASH REPORT

FINANCIAL SERVICES FLASH REPORT FINANCIAL SERVICES FLASH REPORT Basel Committee on Banking Supervision Amends Minimum Capital Requirements for Market Risk February 29, 2016 On January 14, 2016, the Basel Committee on Banking Supervision

More information

Annex 2: Supervisory benchmarks for the setting of Pillar 2 own funds requirements for market risk

Annex 2: Supervisory benchmarks for the setting of Pillar 2 own funds requirements for market risk Annex 2: Supervisory benchmarks for the setting of Pillar 2 own funds requirements for market risk 21 ndst edition January 20198 1. Introduction This document is an Annex to Common criteria and methodologies

More information

Credit risk, arising from losses due to obligor, counterparty or issuer failing to perform its contractual obligations to the Group;

Credit risk, arising from losses due to obligor, counterparty or issuer failing to perform its contractual obligations to the Group; Risk management is an integral part of the Group s business. An effective risk management system is critical for the Group to achieve continued profitability and sustainable growth in shareholder s value,

More information

Internal Trading Book Models Under Threat

Internal Trading Book Models Under Threat Internal Trading Book Models Under Threat A fundamental review proposed by regulators will once again rewrite the rules for trading Barrie Wilkinson Internal models lie at the heart of most risk management

More information

EBF response to the EBA consultation on prudent valuation

EBF response to the EBA consultation on prudent valuation D2380F-2012 Brussels, 11 January 2013 Set up in 1960, the European Banking Federation is the voice of the European banking sector (European Union & European Free Trade Association countries). The EBF represents

More information

Pillar 3 Disclosure (UK)

Pillar 3 Disclosure (UK) MORGAN STANLEY INTERNATIONAL LIMITED Pillar 3 Disclosure (UK) As at 31 December 2009 1. Basel II accord 2 2. Background to PIllar 3 disclosures 2 3. application of the PIllar 3 framework 2 4. morgan stanley

More information

REGULATORY CAPITAL DISCLOSURES MARKET RISK PILLAR 3 REPORT

REGULATORY CAPITAL DISCLOSURES MARKET RISK PILLAR 3 REPORT REGULATORY CAPITAL DISCLOSURES MARKET RISK PILLAR 3 REPORT For the quarterly period ended September 30, 2013 Table of Contents I. Executive Summary 1 Introduction 1 Basel II Overview 1 Basel 2.5 Market

More information

Supervisory Views on Bank Economic Capital Systems: What are Regulators Looking For?

Supervisory Views on Bank Economic Capital Systems: What are Regulators Looking For? Supervisory Views on Bank Economic Capital Systems: What are Regulators Looking For? Prepared By: David M Wright Group, Vice President Federal Reserve Bank of San Francisco July, 2007 Any views expressed

More information

BBVA COMPASS BANCSHARES, INC. MARKET RISK DISCLOSURES

BBVA COMPASS BANCSHARES, INC. MARKET RISK DISCLOSURES BBVA COMPASS BANCSHARES, INC. MARKET RISK DISCLOSURES For the quarter ended March 31, 2018 Contents 1. Overview... 3 2. Risk Governance... 4 3. Risk-based Capital Guidelines: Market Risk... 5 3.1 Covered

More information

ISDA SIMM TM,1 GOVERNANCE FRAMEWORK September 19, 2017

ISDA SIMM TM,1 GOVERNANCE FRAMEWORK September 19, 2017 ISDA SIMM TM,1 GOVERNANCE FRAMEWORK September 19, 2017 1 Patent pending. This document is published by the International Swaps and Derivatives Association, Inc. (ISDA) and is protected by copyright and

More information

Long-term Pension Investment Strategies under Risk-based Regulation

Long-term Pension Investment Strategies under Risk-based Regulation Long-term Pension Investment Strategies under Risk-based Regulation Amsterdam, 7 th April 2014 Dr. Gerhard Scheuenstuhl Dr. Christian Schmitt Agenda 1. Introduction and Overview 2. Methodology: Risk-based

More information

THE INSURANCE BUSINESS (SOLVENCY) RULES 2015

THE INSURANCE BUSINESS (SOLVENCY) RULES 2015 THE INSURANCE BUSINESS (SOLVENCY) RULES 2015 Table of Contents Part 1 Introduction... 2 Part 2 Capital Adequacy... 4 Part 3 MCR... 7 Part 4 PCR... 10 Part 5 - Internal Model... 23 Part 6 Valuation... 34

More information

Siemens Bank GmbH. Annual Report. for the fiscal year ended September 30, Financial Services

Siemens Bank GmbH. Annual Report. for the fiscal year ended September 30, Financial Services Annual Report for the fiscal year ended September 30, 2011 Financial Services Annual Report Editorial Dear Reader, Welcome to the 1 st edition of the Siemens Bank Annual Report. We are glad to state that

More information

Supplementary Information Appendix CA-19 Stress Testing Guidance for the Correlation Trading Portfolio

Supplementary Information Appendix CA-19 Stress Testing Guidance for the Correlation Trading Portfolio Supplementary Information Appendix CA-19 Stress Testing Guidance for the Correlation Trading Portfolio Appendix CA-19 Stress Testing Guidance for the Correlation Trading Portfolio 1. Introduction 1. The

More information

Comments. Betreff. Register of Interest Representatives Identification number in the register:

Comments. Betreff. Register of Interest Representatives Identification number in the register: Comments Betreff Register of Interest Representatives Identification number in the register: 52646912360-95 Contact: Dr. Johannes Voit Telephone: +49 30 20225-5412 Telefax: +49 30 20225-5403 E-Mail: johannes.voit@dsgv.de

More information

Basel III Pillar 3 disclosures

Basel III Pillar 3 disclosures Basel III Pillar 3 disclosures 6M13 For purposes of this report, unless the context otherwise requires, the terms Credit Suisse, the Group, we, us and our mean Credit Suisse Group AG and its consolidated

More information

REGULATORY CAPITAL DISCLOSURES MARKET RISK PILLAR 3 REPORT

REGULATORY CAPITAL DISCLOSURES MARKET RISK PILLAR 3 REPORT REGULATORY CAPITAL DISCLOSURES MARKET RISK PILLAR 3 REPORT For the quarterly period ended December 31, 2013 Table of Contents I. Executive Summary 1 Introduction 1 Basel II Overview 1 Basel 2.5 Market

More information

Goldman Sachs Group UK (GSGUK) Pillar 3 Disclosures

Goldman Sachs Group UK (GSGUK) Pillar 3 Disclosures Goldman Sachs Group UK (GSGUK) Pillar 3 Disclosures For the year ended December 31, 2013 TABLE OF CONTENTS Page No. Introduction... 3 Regulatory Capital... 6 Risk-Weighted Assets... 7 Credit Risk... 7

More information

Modeling credit risk in an in-house Monte Carlo simulation

Modeling credit risk in an in-house Monte Carlo simulation Modeling credit risk in an in-house Monte Carlo simulation Wolfgang Gehlen Head of Risk Methodology BIS Risk Control Beatenberg, 4 September 2003 Presentation overview I. Why model credit losses in a simulation?

More information

REGULATORY CAPITAL DISCLOSURES MARKET RISK PILLAR 3 REPORT

REGULATORY CAPITAL DISCLOSURES MARKET RISK PILLAR 3 REPORT REGULATORY CAPITAL DISCLOSURES MARKET RISK PILLAR 3 REPORT For the quarterly period ended March 31, 2014 Table of Contents I. Executive Summary 1 II. Composition of Material Portfolio of Covered Positions

More information

Bloomberg. Portfolio Value-at-Risk. Sridhar Gollamudi & Bryan Weber. September 22, Version 1.0

Bloomberg. Portfolio Value-at-Risk. Sridhar Gollamudi & Bryan Weber. September 22, Version 1.0 Portfolio Value-at-Risk Sridhar Gollamudi & Bryan Weber September 22, 2011 Version 1.0 Table of Contents 1 Portfolio Value-at-Risk 2 2 Fundamental Factor Models 3 3 Valuation methodology 5 3.1 Linear factor

More information

Market Risk and the FRTB (R)-Evolution Review and Open Issues. Verona, 21 gennaio 2015 Michele Bonollo

Market Risk and the FRTB (R)-Evolution Review and Open Issues. Verona, 21 gennaio 2015 Michele Bonollo Market Risk and the FRTB (R)-Evolution Review and Open Issues Verona, 21 gennaio 2015 Michele Bonollo michele.bonollo@imtlucca.it Contents A Market Risk General Review From Basel 2 to Basel 2.5. Drawbacks

More information

Basel III Pillar 3 disclosures

Basel III Pillar 3 disclosures Basel III Pillar 3 disclosures 6M14 In various tables, use of indicates not meaningful or not applicable. Basel III Pillar 3 disclosures 6M14 List of abbreviations 2 Introduction 3 General 3 Additional

More information

Guidelines on credit institutions credit risk management practices and accounting for expected credit losses

Guidelines on credit institutions credit risk management practices and accounting for expected credit losses Guidelines on credit institutions credit risk management practices and accounting for expected credit losses European Banking Authority (EBA) www.managementsolutions.com Research and Development Management

More information

COMMISSION DELEGATED REGULATION (EU) No /.. of

COMMISSION DELEGATED REGULATION (EU) No /.. of EUROPEAN COMMISSION Brussels, 26.10.2015 C(2015) 7245 final COMMISSION DELEGATED REGULATION (EU) No /.. of 26.10.2015 supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council

More information

Risk Based Capital Guidelines; Market Risk. The Bank of New York Mellon Corporation Market Risk Disclosures. As of June 30, 2013

Risk Based Capital Guidelines; Market Risk. The Bank of New York Mellon Corporation Market Risk Disclosures. As of June 30, 2013 Risk Based Capital Guidelines; Market Risk The Bank of New York Mellon Corporation Market Risk Disclosures As of June 30, 2013 1 Basel II.5 Market Risk Quarterly Disclosure Introduction Since January 1,

More information

UBS AG, Mumbai Branch (Scheduled Commercial Bank) (Incorporated in Switzerland with limited liability)

UBS AG, Mumbai Branch (Scheduled Commercial Bank) (Incorporated in Switzerland with limited liability) Basel II Pillar 3 Disclosures for the period ended 31 March 2010 Contents 1. Background 2. Scope of Application 3. Capital Structure 4. Capital Adequacy- Capital requirement for credit, market and operational

More information

EIOPA s first set of advice to the European Commission on specific items in the Solvency II Delegated Regulation

EIOPA s first set of advice to the European Commission on specific items in the Solvency II Delegated Regulation EIOPA-BoS-17/280 30 October 2017 EIOPA s first set of advice to the European Commission on specific items in the Solvency II Delegated Regulation EIOPA Westhafen Tower, Westhafenplatz 1-60327 Frankfurt

More information

Solvency II Detailed guidance notes for dry run process. March 2010

Solvency II Detailed guidance notes for dry run process. March 2010 Solvency II Detailed guidance notes for dry run process March 2010 Introduction The successful implementation of Solvency II at Lloyd s is critical to maintain the competitive position and capital advantages

More information

VaR Introduction III: Monte Carlo VaR

VaR Introduction III: Monte Carlo VaR VaR Introduction III: Monte Carlo VaR Tom Mills FinPricing http://www.finpricing.com Summary VaR Definition VaR Roles VaR Pros and Cons VaR Approaches Monte Carlo VaR Monte Carlo VaR Methodology and Implementation

More information

Preprint: Will be published in Perm Winter School Financial Econometrics and Empirical Market Microstructure, Springer

Preprint: Will be published in Perm Winter School Financial Econometrics and Empirical Market Microstructure, Springer STRESS-TESTING MODEL FOR CORPORATE BORROWER PORTFOLIOS. Preprint: Will be published in Perm Winter School Financial Econometrics and Empirical Market Microstructure, Springer Seleznev Vladimir Denis Surzhko,

More information

BBVA COMPASS BANCSHARES, INC. MARKET RISK DISCLOSURES

BBVA COMPASS BANCSHARES, INC. MARKET RISK DISCLOSURES BBVA COMPASS BANCSHARES, INC. MARKET RISK DISCLOSURES For the quarter ended June 30, 2016 Contents 1. Overview... 3 2. Risk Governance... 4 3. Risk-based Capital Guidelines: Market Risk... 5 3.1 Covered

More information

The risk of losses because the fair value of the Group s assets and liabilities varies with changes in market conditions.

The risk of losses because the fair value of the Group s assets and liabilities varies with changes in market conditions. 4. Market risk 51 4.1. Definition 51 4.2. Policy and responsibility 52 4.3. Monitoring 52 4.4. Use of models 52 4.5. Interest rate risk 54 4.5.1. Floor risk 54 4.6. Exchange rate risk 54 4.7. Equity market

More information

Isabelle Vaillant Director of Regulation. European Institute of Financial Regulation (EIFR) 23 Septembre 2016

Isabelle Vaillant Director of Regulation. European Institute of Financial Regulation (EIFR) 23 Septembre 2016 Isabelle Vaillant Director of Regulation European Institute of Financial Regulation (EIFR) 23 Septembre 2016 Overview of the presentation 1 EBA mission and scope of action 2 EBA Single Rulebook 3 Regulatory

More information

Advisory Guidelines of the Financial Supervision Authority. Requirements to the internal capital adequacy assessment process

Advisory Guidelines of the Financial Supervision Authority. Requirements to the internal capital adequacy assessment process Advisory Guidelines of the Financial Supervision Authority Requirements to the internal capital adequacy assessment process These Advisory Guidelines were established by Resolution No 66 of the Management

More information

Quantitative and Qualitative Disclosures about Market Risk.

Quantitative and Qualitative Disclosures about Market Risk. Item 7A. Quantitative and Qualitative Disclosures about Market Risk. Risk Management. Risk Management Policy and Control Structure. Risk is an inherent part of the Company s business and activities. The

More information

Regulatory Capital Pillar 3 Disclosures

Regulatory Capital Pillar 3 Disclosures Regulatory Capital Pillar 3 Disclosures June 30, 2015 Table of Contents Background 1 Overview 1 Corporate Governance 1 Internal Capital Adequacy Assessment Process 2 Capital Demand 3 Capital Supply 3 Capital

More information

Market Risk: FROM VALUE AT RISK TO STRESS TESTING. Agenda. Agenda (Cont.) Traditional Measures of Market Risk

Market Risk: FROM VALUE AT RISK TO STRESS TESTING. Agenda. Agenda (Cont.) Traditional Measures of Market Risk Market Risk: FROM VALUE AT RISK TO STRESS TESTING Agenda The Notional Amount Approach Price Sensitivity Measure for Derivatives Weakness of the Greek Measure Define Value at Risk 1 Day to VaR to 10 Day

More information

Basel III Pillar 3 Quantitative Disclosures

Basel III Pillar 3 Quantitative Disclosures Basel III Pillar 3 Quantitative Disclosures 30 September 2017 Basel III Pillar 3 Quantitative Disclosures Tables and templates Template ref.# Part 2 Overview of risk management and OVA Bank risk management

More information

Risk Sensitive Capital Treatment for Clearing Member Exposure to Central Counterparty Default Funds

Risk Sensitive Capital Treatment for Clearing Member Exposure to Central Counterparty Default Funds Risk Sensitive Capital Treatment for Clearing Member Exposure to Central Counterparty Default Funds March 2013 Contact: Edwin Budding, ISDA ebudding@isda.org www.isda.org 2013 International Swaps and Derivatives

More information

Basel III: Proposed Revisions to Standardized Approach to Credit Risk

Basel III: Proposed Revisions to Standardized Approach to Credit Risk BOARD OF GOVERNORS of the FEDERAL RESERVE SYSTEM Basel III: Proposed Revisions to Standardized Approach to Credit Risk Seminar for Senior Bank Supervisors from Emerging Economies October 30, 2017 Disclaimer

More information

Northern Trust Corporation

Northern Trust Corporation Northern Trust Corporation Market Risk Disclosures June 30, 2015 Market Risk Disclosures Effective January 1, 2013, Northern Trust Corporation (Northern Trust) adopted revised risk based capital guidelines

More information

Preparing for the Fundamental Review of the Trading Book (FRTB)

Preparing for the Fundamental Review of the Trading Book (FRTB) Regulatory Update Preparing for the Fundamental Review of the Trading Book (FRTB) With the final set of definitions soon to be released by the Basel Committee on Banking Supervision, Misys experts discuss

More information

NAIC VA Reserve and Capital Reform: Perspectives at the Final Turn

NAIC VA Reserve and Capital Reform: Perspectives at the Final Turn Equity-Based Insurance Guarantees Conference Nov. 6-7, 2017 Baltimore, MD NAIC VA Reserve and Capital Reform: Perspectives at the Final Turn Aaron Sarfatti Sponsored by NAIC VA RESERVE AND CAPITAL REFORM

More information

GOLDMAN SACHS GROUP HOLDINGS (U.K.) ( GSGHUK )

GOLDMAN SACHS GROUP HOLDINGS (U.K.) ( GSGHUK ) AS AT 31 DECEMBER 2011 GOLDMAN SACHS GROUP HOLDINGS (U.K.) ( GSGHUK ) PILLAR 3 DISCLOSURES Table of Contents 1. Overview 1 2. Basel II and Pillar 3 1 3. Scope of Pillar 3 1 4. Capital Resources and Capital

More information

Measurement of Market Risk

Measurement of Market Risk Measurement of Market Risk Market Risk Directional risk Relative value risk Price risk Liquidity risk Type of measurements scenario analysis statistical analysis Scenario Analysis A scenario analysis measures

More information

Capital Adequacy (Consolidated)

Capital Adequacy (Consolidated) Capital Adequacy (Consolidated) Disclosure Regarding Capital Adequacy and Features of Regulatory Capital Instruments The Bank calculates its capital adequacy ratio based on the formula contained in Notification

More information

BASEL II & III IMPLEMENTATION FRAMEWORK. Gift Chirozva Chief Bank Examiner Bank Licensing, Supervision & Surveillance Reserve Bank of Zimbabwe

BASEL II & III IMPLEMENTATION FRAMEWORK. Gift Chirozva Chief Bank Examiner Bank Licensing, Supervision & Surveillance Reserve Bank of Zimbabwe BASEL II & III IMPLEMENTATION 1 FRAMEWORK Gift Chirozva Chief Bank Examiner Bank Licensing, Supervision & Surveillance Reserve Bank of Zimbabwe email: gchirozva@rbz.co.zw 9/16/2016 giftezh@gmail.com Outline

More information

STRESS TESTING GUIDELINE

STRESS TESTING GUIDELINE c DRAFT STRESS TESTING GUIDELINE November 2011 TABLE OF CONTENTS Preamble... 2 Introduction... 3 Coming into effect and updating... 6 1. Stress testing... 7 A. Concept... 7 B. Approaches underlying stress

More information

Current on: 28 December 2012

Current on: 28 December 2012 Current on: 28 December 2012 Regulation Governing the Capital Adequacy of Institutions, Groups of Institutions and Financial Holding Groups (Solvency Regulation (Solvabilitätsverordnung)) * of 14 December

More information

Basel Committee on Banking Supervision. Basel III counterparty credit risk - Frequently asked questions

Basel Committee on Banking Supervision. Basel III counterparty credit risk - Frequently asked questions Basel Committee on Banking Supervision Basel III counterparty credit risk - Frequently asked questions November 2011 Copies of publications are available from: Bank for International Settlements Communications

More information

RunnING Risk on GPUs. Answering The Computational Challenges of a New Environment. Tim Wood Market Risk Management Trading - ING Bank

RunnING Risk on GPUs. Answering The Computational Challenges of a New Environment. Tim Wood Market Risk Management Trading - ING Bank RunnING Risk on GPUs Answering The Computational Challenges of a New Environment Tim Wood Market Risk Management Trading - ING Bank Nvidia GTC Express September 19 th 2012 www.ing.com ING Bank Part of

More information

Regulatory Capital Pillar 3 Disclosures

Regulatory Capital Pillar 3 Disclosures Regulatory Capital Pillar 3 Disclosures December 31, 2016 Table of Contents Background 1 Overview 1 Corporate Governance 1 Internal Capital Adequacy Assessment Process 2 Capital Demand 3 Capital Supply

More information

Basel III Pillar 3 Disclosures Report. For the Quarterly Period Ended December 31, 2015

Basel III Pillar 3 Disclosures Report. For the Quarterly Period Ended December 31, 2015 BASEL III PILLAR 3 DISCLOSURES REPORT For the quarterly period ended December 31, 2015 Table of Contents Page 1 Morgan Stanley... 1 2 Capital Framework... 1 3 Capital Structure... 2 4 Capital Adequacy...

More information

EBA/CP/2015/ November Consultation Paper

EBA/CP/2015/ November Consultation Paper EBA/CP/2015/21 12 November 2015 Consultation Paper Guidelines on the treatment of CVA risk under the supervisory review and evaluation process (SREP) CONSULTATION PAPER ON DRAFT GUIDELINES ON THE TREATMENT

More information

Bank of America 2018 Dodd-Frank Act Mid-Cycle Stress Test Results BHC Severely Adverse Scenario October 18, 2018

Bank of America 2018 Dodd-Frank Act Mid-Cycle Stress Test Results BHC Severely Adverse Scenario October 18, 2018 Bank of America 2018 Dodd-Frank Act Mid-Cycle Stress Test Results BHC Severely Adverse Scenario October 18, 2018 Important Presentation Information The 2018 Dodd-Frank Act Mid-Cycle Stress Test Results

More information

African Bank Holdings Limited and African Bank Limited

African Bank Holdings Limited and African Bank Limited African Bank Holdings Limited and African Bank Limited Public Pillar III Disclosures in terms of the Banks Act, Regulation 43 CONTENTS 1. Executive summary... 3 2. Basis of compilation... 7 3. Supplementary

More information

Standard Initial Margin Model (SIMM) How to validate a global regulatory risk model

Standard Initial Margin Model (SIMM) How to validate a global regulatory risk model Connecting Markets East & West Standard Initial Margin Model (SIMM) How to validate a global regulatory risk model RiskMinds Eduardo Epperlein* Risk Methodology Group * In collaboration with Martin Baxter

More information

Market Risk Management Framework. July 28, 2012

Market Risk Management Framework. July 28, 2012 Market Risk Management Framework July 28, 2012 Views or opinions in this presentation are solely those of the presenter and do not necessarily represent those of ICICI Bank Limited 2 Introduction Agenda

More information

The Goldman Sachs Group, Inc. PILLAR 3 DISCLOSURES

The Goldman Sachs Group, Inc. PILLAR 3 DISCLOSURES The Goldman Sachs Group, Inc. PILLAR 3 DISCLOSURES For the period ended September 30, 2016 TABLE OF CONTENTS Page No. Index of Tables 1 Introduction 2 Regulatory Capital 5 Capital Structure 6 Risk-Weighted

More information

Regulatory Capital Disclosures

Regulatory Capital Disclosures The Goldman Sachs Group, Inc. Regulatory Capital Disclosures For the quarterly period ended September 30, 2013 0 P age Introduction The Goldman Sachs Group, Inc. (Group Inc.) is a leading global investment

More information