See Full Document Text
26.10.2022 EN Official Journal of the European Union L 276/47
COMMISSION DELEGATED REGULATION (EU) 2022/2059
of 14 June 2022
supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council with
regard to regulatory technical standards specifying the technical details of back-testing and profit
and loss attribution requirements under Articles 325bf and 325bg of Regulation (EU) No 575/2013
(Text with EEA relevance)
THE EUROPEAN COMMISSION,
Having regard to the Treaty on the Functioning of the European Union,
Having regard to Regulation (EU) No 575/2013 of 26 June 2013 of the European Parliament and of the Council on
prudential requirements for credit institutions and amending Regulation (EU) No 648/2012(1), and in particular Article
325bf(9), third subparagraph, and Article 325bg(4), third subparagraph, thereof,
Whereas:
(1) Article 325bf(2) of Regulation (EU) No 575/2013 requires institutions to count daily overshootings on the basis of
back-testing of the hypothetical and actual changes in their portfolio’s value composed of all the positions assigned
to their trading desks. Such back-testing is intended to assess, depending on the level at which it is performed,
whether it is appropriate to calculate the own funds requirements for positions in a trading desk using the
alternative internal model approach, and whether the own funds requirements associated with modellable risk
factors are adequate. Article 325bf(4) of Regulation (EU) No 575/2013 requires institutions to use the end-of-day
value of the portfolio as a starting point for such back-testing, including all adjustments, such as reserves or any
valuation adjustment.
(2) In the back-testing of the value-at-risk number, some market risk effects that are not captured by the internal risk-
measurement model should still be included in the actual changes in the portfolio’s value. Accordingly, all
adjustments related to market risk, regardless of the frequency at which they are updated by institutions, should be
included in the actual changes in the portfolio’s value. The back-testing of the value-at-risk number with the
hypothetical changes in the portfolio’s value, however, should be performed under the assumption of a static
portfolio. Therefore, institutions should include in the computation of such hypothetical changes in the portfolio’s
value only those adjustments that are calculated daily and that are included in the internal risk-measurement model.
(3) In some cases, it is possible that, due to the nature of an adjustment and due to the internal risk management
applicable to that adjustment, such adjustment is computed across sets of positions that are assigned to more than
one trading desks. To ensure harmonisation across the Union, institutions should be required, when calculating the
actual and hypothetical changes in a trading desk’s portfolio value, to either recalculate such adjustment for each
trading desk on the stand-alone basis of the positions assigned to the trading desk only, or, where specific
conditions are met, to reflect the changes arising from such adjustment only in the context of the back-testing
referred to in Article 325bf(6) of Regulation (EU) No 575/2013. Accordingly, where institutions perform the end-
of-day valuation process to derive the trading desks’ end-of-day portfolio values, they should not be allowed, when
calculating hypothetical and actual changes at the trading desk level, to allocate the adjustment to the trading desks
in a manner that is proportionate to each trading desks’ contribution to the value of the adjustment.
(4) The profit and loss attribution requirement laid down in Article 325bg of Regulation (EU) No 575/2013 has a
prominent role in ensuring that the theoretical changes and the hypothetical changes in the trading desk portfolio’s
value are sufficiently close. The statistical tests included in the international standards developed by the Basel
Committee for Banking and Supervision, the Spearman correlation coefficient and the Kolmogorov-Smirnov test
metric, to operationalise the profit and loss attribution requirement are appropriate for that purpose and should
therefore be used by institutions.
(1) OJ L 176, 27.6.2013, p. 1.L 276/48 EN Official Journal of the European Union 26.10.2022
(5) In the international standards, it is laid down that institutions should satisfy an additional capital requirement where
the theoretical and hypothetical changes in the value of trading desks’ portfolios are not sufficiently close. In that
situation, institutions should be required to calculate and report to competent authorities that additional capital
requirement for those trading desks.
(6) When reporting the profit and loss attribution results in accordance with Article 325az(2), point (d), of Regulation
(EU) No 575/2013, institutions should also highlight where the hypothetical changes and theoretical changes to the
value of a trading desk’s portfolio materially differ. This should help institutions to identify potential deficiencies in
the calculation of the theoretical changes.
(7) When assessing compliance with the profit and loss attribution requirement, theoretical changes in a portfolio’s
value are compared against hypothetical changes which are calculated under the assumption of a static portfolio.
That comparison aims at identifying the materiality of differences in the valuation processes of the institution’s risk-
measurement model producing the theoretical changes, and the valuation processes of the institution’s internal
systems producing the hypothetical changes. To ensure that that comparison is not affected by changes in the
composition of the portfolio, the theoretical changes to a portfolio’s value used in the profit and loss attribution
requirement should also be calculated under the assumption of a static portfolio.
(8) To ensure consistency with international standards, the hypothetical changes in the portfolio’s value that are
calculated for the purpose of assessing compliance with the profit and loss attribution requirement should be
aligned with the hypothetical changes in the portfolio’s value, that an institution calculates for the purposes of the
back-testing.
(9) Differences between the valuation processes producing hypothetical and theoretical changes in a portfolio’s value
may be due to omissions of certain risk factors in the risk-measurement model or simplifications of the risk-
measurement model. Other differences may be due to misalignments in the data that an institution uses as inputs
for determining its portfolios’ value. To avoid additional sources of discrepancies resulting from such differences in
input data, institutions should be allowed to align the input data provided that some specific conditions are met.
(10) The frequency at which the results of the profit and loss attribution requirement are to be reported should be aligned
to the frequency at which the modellability of the risk factors is assessed and the frequency at which the own funds
requirements for market risk are reported. That way, institutions will be able to determine the own funds
requirements for market risk based on consistent results for the back-testing requirements, the profit and loss
attribution requirements and the assessment of modellability.
(11) The manner in which institutions should aggregate their total own funds requirements for market risk should be
aligned with the international standards. Therefore, the aggregation formula should reflect the results of the profit
and loss attribution requirement, including the additional capital requirement where theoretical and hypothetical
changes are not sufficiently close. In addition, the aggregation formula should reflect a reduction in diversification
benefits where the own funds requirements for a trading desk are calculated with the alternative standardised
approach and not with the alternative internal model approach.
(12) In order to assist competent authorities to check compliance of institutions with this Regulation, institutions should
be required to document their implementation of this Regulation.
(13) The provisions of this Regulation are closely linked to each other, since they all deal with elements to be included in
changes of a trading desk portfolio’s value for the purposes of calculating the own funds requirements for market
risks using the alternative internal model approach. To ensure coherence between those provisions, which should
enter into force at the same time, to facilitate a comprehensive understanding of those provisions and to ensure easy
access to them by persons subject to the obligations set out within, it is desirable to include all the regulatory
technical standards required by Article 325bf(9), third subparagraph, and Article 325bg(4), third subparagraph, of
Regulation (EU) No 575/2013 in a single Regulation.26.10.2022 EN Official Journal of the European Union L 276/49
(14) This Regulation is based on the draft regulatory technical standards submitted to the Commission by the EBA.
(15) The EBA has conducted open public consultations on the draft regulatory technical standards on which this
Regulation is based, analysed the potential related costs and benefits, and requested the advice of the Banking
Stakeholder Group established in accordance with Article 37 of Regulation (EU) No 1093/2010 of the European
Parliament and of the Council(2),
HAS ADOPTED THIS REGULATION:
CHAPTER 1
TECHNICAL ELEMENTS TO BE INCLUDED IN THE ACTUAL AND HYPOTHETICAL CHANGES IN A PORTFOLIO’S VALUE
FOR THE PURPOSES OF THE BACK-TESTING REQUIREMENTS
Section 1
Technical elements to be included in the actual changes in a portfolio’s value
Article 1
Technical elements to be included in the actual changes in a trading desk portfolio’s value for the back-testing
requirements performed at trading desk level
1. For the purposes of the trading desk back-testing referred to in Article 325bf(3) of Regulation (EU) No 575/2013,
institutions shall calculate the actual changes in a trading desk portfolio’s value by using the same techniques, including the
same pricing methods, model parametrisations and market data, as those used in the process used to calculate the end-of-
day values (‘end-of-day valuation process’), including the results of the independent price verification referred to in Article
105(8) of Regulation (EU) No 575/2013.
2. When calculating the actual changes in a trading desk portfolio’s value, institutions shall reflect the changes in the
value of that portfolio that are due to the passage of time.
3. When calculating the actual changes in a trading desk portfolio’s value, institutions shall include in that value all those
adjustments that have been considered in the end-of-day valuation process referred to in paragraph 1 and that are market
risk related, with the exception of all of the following adjustments:
(a) credit valuation adjustments reflecting the current market value of the credit risk of counterparties to the institution;
(b) adjustments attributed to the institution’s own credit risk that have been excluded from own funds in accordance with
Article 33(1), point (b) or (c), of Regulation (EU) No 575/2013;
(c) additional value adjustments deducted from Common Equity Tier 1 capital in accordance with Article 34 of Regulation
(EU) No 575/2013.
4. Institutions shall calculate the value of an adjustment as referred to in paragraph 3 on the basis of all positions that are
assigned to the same trading desk. Institutions shall include changes in the adjustment’s value only on the date on which the
adjustment is calculated.
5. In addition to the exclusions laid down in paragraph 3, points (a), (b), and (c), institutions may exclude from the
calculation of the actual changes in a trading desk portfolio’s value an adjustment that is calculated in the end-of-day
valuation process across sets of positions assigned to more than one trading desk on a net basis, where all of the following
conditions are met:
(a) that adjustment is, due to its nature, calculated on a net basis across sets of positions that are assigned to more than one
trading desk;
(2) Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European
Supervisory Authority (European Banking Authority), amending Decision No 716/2009/EC and repealing Commission Decision
2009/78/EC (OJ L 331, 15.12.2010, p. 12).L 276/50 EN Official Journal of the European Union 26.10.2022
(b) the internal risk management of that adjustment is consistent with the level at which the adjustment is calculated;
(c) the institution concerned documents all of the following:
(i) the sets of positions across which the adjustment is calculated;
(ii) the reasoning underpinning the calculation of the adjustment across the sets of positions referred to in point (i);
(iii) the justification for not calculating the adjustment on the basis of positions assigned to that trading desk only.
Article 2
Technical elements to be included in the actual changes in the portfolio’s value for the back-testing requirements
performed at institution level
1. For the purposes of the back-testing referred to in Article 325bf(6) of Regulation (EU) No 575/2013, institutions shall
calculate the actual changes in a portfolio’s value by using the same techniques, including the same pricing methods, model
parametrisations and market data, as those used in the end-of-day valuation process, including the results of the
independent price verification referred to in Article 105(8) of Regulation (EU) No 575/2013.
2. When calculating the actual changes in a portfolio’s value, institutions shall reflect the change in the value of that
portfolio that are due to the passage of time.
3. When calculating the actual changes in a portfolio’s value, institutions shall include in that value all the adjustments
that have been considered in the end-of-day valuation process referred to in paragraph 1 and that are market risk related,
with the exception of all of the following adjustments:
(a) credit valuation adjustments reflecting the current market value of the credit risk of counterparties to the institution;
(b) adjustments attributed to the institution’s own credit risk that have been excluded from own funds in accordance with
Article 33(1), point (b) or (c), of Regulation (EU) No 575/2013;
(c) additional value adjustments deducted from Common Equity Tier 1 capital in accordance with Article 34 of Regulation
(EU) No 575/2013.
4. Institutions shall calculate the change in the value of the adjustments referred to in paragraph 3 on the basis of either
of the following:
(a) all positions that are assigned to trading desks for which institutions calculate the own funds requirements for market
risk in accordance with the alternative internal model approach set out in Part Three, Title IV, Chapter 1b of
Regulation (EU) No 575/2013;
(b) all positions subject to the own funds requirements for market risk.
5. Institutions shall include changes in the adjustment’s value only on the date on which the adjustment is calculated.26.10.2022 EN Official Journal of the European Union L 276/51
Section 2
Technical elements to be included in the hypothetical changes in a portfolio’s value requirements
Article 3
Technical elements to be included in the hypothetical changes in a trading desk portfolio’s value for the back-
testing requirements performed at trading desk level
1. For the purposes of the trading desk back-testing referred to in Article 325bf(3) of Regulation (EU) No 575/2013,
institutions shall calculate the hypothetical changes in a trading desk portfolio’s value by using the same techniques,
including the same pricing methods, model parametrisations and market data, as those used in the end-of-day valuation
process, without considering any fees and commissions.
2. When calculating the hypothetical changes in the trading desk portfolio’s value, institutions shall reflect the changes
in the value of the trading desk portfolio that are due to the passage of time in the same way they reflect such changes in
the calculation of:
(a) the expected shortfall risk measure referred to in Article 325ba(1), point (a), of Regulation (EU) No 575/2013;
(b) the stress scenario risk measure referred to in Article 325bk of Regulation (EU) No 575/2013.
3. When calculating the hypothetical changes in a trading desk portfolio’s value, institutions shall include in that value
all those adjustments that have been considered in the end-of-day valuation process referred to in paragraph 1 and that are
market risk related, that are calculated on a daily basis, and that are included in the institution’s risk-measurement model,
with the exception of all of the following adjustments:
(a) credit valuation adjustments reflecting the current market value of the credit risk of counterparties to the institution;
(b) adjustments attributed to the institution’s own credit risk that have been excluded from own funds in accordance with
Article 33(1), point (b) or (c), of Regulation (EU) No 575/2013;
(c) additional value adjustments deducted from Common Equity Tier 1 capital in accordance with Article 34 of Regulation
(EU) No 575/2013.
4. Institutions shall calculate the value of an adjustment as referred to in paragraph 3 on the basis of all the positions
assigned to that trading desk. Institutions shall include changes in an adjustment’s value based on a comparison between
the end-of-day adjustment’s value and, assuming unchanged positions in the trading desk portfolio, the adjustment’s value
at the end of the subsequent day.
5. In addition to the exclusions laid down in paragraph 3, points (a), (b), and (c), institutions may also exclude from the
calculation of the hypothetical changes to a trading’s desk portfolio’s value an adjustment that is calculated on a net basis in
the end-of-day valuation process across sets of positions assigned to more than one trading desk, where all of the following
conditions are met:
(a) that adjustment is, due to its nature, calculated on a net basis across sets of positions that are assigned to more than one
trading desk;
(b) the internal risk management of that adjustment is consistent with the level at which the adjustment is calculated;
(c) the institution documents all of the following:
(i) the sets of positions across which the adjustment is calculated;
(ii) the reasoning underpinning the calculation of the adjustment across the sets of positions referred to in point (i);
(iii) the justification for not calculating the adjustment on the basis of positions assigned to that trading desk only.L 276/52 EN Official Journal of the European Union 26.10.2022
Article 4
Technical elements to be included in the hypothetical changes in the portfolio’s value for the back-testing
requirements performed at institution level
1. For the purposes of the back-testing referred to in Article 325bf(6) of Regulation (EU) No 575/2013, institutions shall
calculate the hypothetical changes in the portfolio’s value by using the same techniques, including the same pricing
methods, model parametrisations and market data, as those used in the end-of-day valuation process, without considering
any fees and commissions.
2. When calculating the hypothetical changes in the portfolio’s value, institutions shall reflect the changes in the value of
the portfolio that are due to the passage of time in the same way they reflect such changes in the calculation of:
(a) the expected shortfall risk measure referred to in Article 325ba(1), point (a), of Regulation (EU) No 575/2013;
(b) the stress scenario risk measure referred to in Article 325bk of Regulation (EU) No 575/2013.
3. When calculating hypothetical changes in a portfolio’s value, institutions shall include in that value all those
adjustments that have been considered in the end-of-day valuation process referred to in paragraph 1 and that are market
risk related, that are calculated on a daily basis and that are included in the institution’s risk-measurement model, with the
exception of all of the following adjustments:
(a) credit valuation adjustments reflecting the current market value of the credit risk of counterparties to the institution;
(b) adjustments attributed to the institution’s own credit risk that have been excluded from own funds in accordance with
Article 33(1), point (b) or (c), of Regulation (EU) No 575/2013;
(c) additional valuation adjustments deducted from Common Equity Tier 1 capital in accordance with Article 34 of
Regulation (EU) No 575/2013.
4. Institutions shall calculate the changes in the value of the adjustments referred to in paragraph 3 on the basis of either
of the following:
(a) all those positions that are assigned to trading desks for which institutions calculate the own funds requirements for
market risk in accordance with the alternative internal model approach set out in Part Three, Title IV, Chapter 1b of
Regulation (EU) No 575/2013.
(b) all positions subject to own funds requirements for market risk.
Article 5
Documentation requirements
Institutions shall have policies and procedures in place setting out how they calculate the actual and hypothetical changes in
a trading desk portfolio’s value or in a portfolio’s value in accordance with Articles 1 to 4 of this Regulation. Those policies
and procedures shall contain all of the following elements:
(a) when describing how the actual changes in value of the portfolio concerned are calculated, an outline of the differences
between the changes in the end-of-day portfolio values produced by the end-of-day valuation process and the actual
changes in the value of the portfolio concerned;
(b) the fees and commissions and how the exclusion referred to in Article 325bf(4), point (b), of Regulation (EU)
No 575/2013 is applied;
(c) a list of all adjustments, specifying for each adjustment all of the following:
(i) a description and purpose of the adjustment;
(ii) the methodology and process used for the calculation of the adjustment;
(iii) the frequency of the calculation of the adjustment and, where the frequency is less than daily, the reasoning for
such frequency;26.10.2022 EN Official Journal of the European Union L 276/53
(iv) whether the adjustment is sensitive to market risk;
(v) the sets of positions across which the adjustment is calculated and the reasons for performing the calculation
across such sets;
(vi) whether and how the risk stemming from changes in the adjustment is actively hedged and which trading desk or
desks are responsible for such hedging;
(vii) whether and how the adjustment is taken into account in the actual changes in the value of the portfolio
concerned for the purposes of the back-testing referred to in Article 325bf(3) of Regulation (EU) No 575/2013
and the back-testing referred to in Article 325bf(6) of that Regulation;
(viii) whether and how the adjustment is taken into account in the hypothetical changes in the value of the portfolio
concerned for the purposes of Articles 325bf and 325bg of Regulation (EU) No 575/2013, and an outline of
how the change in the adjustment is calculated if unchanged positions in the portfolio are assumed.
CHAPTER 2
TECHNICAL SPECIFICATION OF THE PROFIT AND LOSS ATTRIBUTION REQUIREMENT
Section 1
Criteria necessary to ensure that the theoretical changes and the hypothetical changes in the value of a
trading desk portfolio are sufficiently close and consequences for trading desks that do not meet that
condition
Article 6
General requirements
1. For the purposes of Article 325bg(2) of Regulation (EU) No 575/2013, institutions shall calculate, for a given trading
desk’s portfolio, the Spearman correlation coefficient laid down in Article 7 of this Regulation, and the Kolmogorov-
Smirnov test metric laid down in Article 8 of this Regulation and, based on the results of those calculations, apply the
criteria referred to in Article 9 of this Regulation. Where, according to those criteria, the theoretical changes and the
hypothetical changes in the value of a trading desk portfolio are not sufficiently close, institutions shall be subject to the
consequence set out in Article 10 of this Regulation.
2. For the purposes of paragraph 1, institutions may align the point in time (snapshot time) for which they calculate the
theoretical changes in the trading desk portfolio’s value with the snapshot time for which they calculate the hypothetical
changes in that value.
Article 7
Calculation of the Spearman correlation coefficient
1. Institutions shall calculate the Spearman correlation coefficient referred to in Article 6(1) of this Regulation by
performing the following steps in the following order:
(a) they shall determine the time series of observations of the hypothetical and theoretical changes in the trading desk
portfolio’s value for the most recent 250 business days;
(b) from the time series of the hypothetical and theoretical changes referred to in point (a), institutions shall produce the
corresponding time series of ranks in accordance with paragraph 2, treating the time series of the hypothetical and
theoretical changes as the originating time series;L 276/54 EN Official Journal of the European Union 26.10.2022
(c) they shall calculate the Spearman correlation coefficient in accordance with the following formula:
covðR ,R Þ
r ¼ HPL RTPL
s
σ •σ
R R
HPL RTPL
Where:
R = the time series of ranks produced from the time series of hypothetical changes referred to in point
HPL
(b);
R = the time series of ranks produced from the time series of theoretical changes referred to in point (b);
RTPL
σ = the standard deviation of the time series of ranks R calculated in accordance with paragraph 3,
RHPL HPL
point (a);
σ = the standard deviation of the time series of ranks R calculated in accordance with paragraph 3,
RRTPL RTPL
point (b);
cov (R , R )= the covariance calculated in accordance with paragraph 3, point (c), between the times series of
HPL RTPL
ranks R and R .
HPL RTPL
2. Institutions shall produce the time series of ranks referred to in paragraph 1, point (b), from an originating time series
by performing the following steps in the following order:
(a) for each observation within the originating time series, institutions shall count the number of observations with a lower
value than that observation within that time series;
(b) institutions shall label each observation with the number resulting from the calculation set out in point (a) increased by
one;
(c) where, as a result of the labelling in accordance with point (b), two or more observations are labelled with the same
number, institutions shall in addition increase the numbers of those labels with the following fraction:
ðN – 1Þ
2
where N equals the quantity of the labels with the same number;
(d) institutions shall consider as time series of ranks, the time series of the labels obtained in accordance with points (b)
and (c).
3. Institutions shall calculate the standard deviation of the time series of ranks R in accordance with the formula laid
HPL
down in point (a), the standard deviation of the time series of ranks R in accordance with the formula laid down in
RTPL
point (b), and the covariance between those time series in accordance with the formula laid down in point (c) as follows:
sffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi
250
∑ ðR – μ Þ2
(a) σ RHPL ¼ i¼1 H 2PL 4i
9
R HPL ;
sffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi
250
∑ ðR – μ Þ2
(b) σ RRTPL ¼ i¼1 RT 2PL 4i
9
R RTPL ;
250
∑ ðR – μ Þ•ðR – μ Þ
(c) cov ðR HPL,R RTPL Þ ¼ i¼1 HPL i R HPL RTPL i R RTPL ;
249
Where:
i= the index that denotes the observation in the time series of ranks;
R = the ‘i-th’ observation of the time series of ranks R ;
HPLi HPL
μ = the mean of the time series of ranks R ;
RHPL HPL
R = the ‘i-th’ observation of the time series of ranks R ;
RTPLi RTPL
μ = the mean of the time series of ranks R .
RRTPL RTPL26.10.2022 EN Official Journal of the European Union L 276/55
Article 8
Calculation of the Kolmogorov-Smirnov test metric
1. Institutions shall calculate the Kolmogorov-Smirnov test metric referred to in Article 6(1) of this Regulation by
performing the following steps in the following order:
(a) they shall determine the time series of the most recent 250 business days of observations of the hypothetical and
theoretical changes in the trading desk portfolio’s value;
(b) they shall calculate the empirical cumulative distribution function of the hypothetical changes in the trading desk
portfolio’s value from the time series of the hypothetical changes referred to in point (a);
(c) they shall calculate the empirical cumulative distribution function of the theoretical changes in the trading desk
portfolio’s value from the time series of the theoretical changes referred to in point (a);
(d) they shall obtain the Kolmogorov-Smirnov test metric by calculating the maximum difference between the two
empirical cumulative distributions calculated in accordance with points (b) and (c) at any possible value of profit and
loss.
2. For the purposes of paragraph 1, the empirical distribution function obtained from a time series shall be understood
as the function that, given any number as input, results in the ratio of the number of observations within the time series
with lower or equal value than the input number to the total number of observations within the time series.
Article 9
Specification of criteria necessary to ensure that the theoretical changes and the hypothetical changes in the value
of a trading desk portfolio are sufficiently close
1. For the purposes of Article 325bg(2) of Regulation (EU) No 575/2013, institutions shall classify each of the trading
desks as a green, orange, yellow or red zone desk in accordance with paragraphs 2 to 5.
Where a trading desk is classified as a green zone desk, theoretical changes and the hypothetical changes in the value of that
trading desk’s portfolio shall be considered sufficiently close.
Where a trading desk is classified as an orange, yellow or red zone desk, theoretical changes and the hypothetical changes in
the value of that trading desk’s portfolio shall not be considered sufficiently close.
2. A trading desk shall be classified as a ‘green zone desk’ where all of the following conditions are met:
(a) the Spearman correlation coefficient for the trading desk, calculated in accordance with Article 7 of this Regulation, is
greater than 0,8;
(b) the Kolmogorov-Smirnov test metric for the trading desk, calculated in accordance with Article 8 of this Regulation, is
lower than 0,09.
3. A trading desk shall be classified as a ‘red zone desk’ where either of the following conditions is met:
(a) the Spearman correlation coefficient for the trading desk, calculated in accordance with Article 7 of this Regulation, is
lower than 0,7;
(b) the Kolmogorov-Smirnov test metric for the trading desk, calculated in accordance with Article 8 of this Regulation, is
greater than 0,12.
4. A trading desk shall be classified as an ‘orange zone’ desk where all of the following conditions are met:
(a) the trading desk is not classified as either a green or a red zone desk;L 276/56 EN Official Journal of the European Union 26.10.2022
(b) the own funds requirements for all the positions assigned to that trading desk were calculated in the previous quarter
based on the alternative standardised approach set out in Part Three, Title IV, Chapter 1a of Regulation (EU)
No 575/2013.
5. A trading desk which is not classified as a green, orange or red zone desk, shall be classified as a ‘yellow zone desk’.
Article 10
Consequences for trading desks that are classified as yellow, orange or red zone desks
1. Institutions calculating the own funds requirements in accordance with the alternative internal model approach set
out in Part Three, Title IV, Chapter 1b of Regulation (EU) No 575/2013 for positions assigned to trading desks that have
been classified as red, orange or yellow zone desks in accordance with Article 9 of this Regulation shall calculate, in
relation to those positions, a capital surcharge in accordance with the following formula:
Capital surcharge ¼k•maxfSA – IMA ;0g
ima ima
Where:
k= as specified in paragraph 2;
SA = the own funds requirements for market risks calculated in accordance with the alternative standardised
ima
approach set out in Part Three, Title IV, Chapter 1a of Regulation (EU) No 575/2013 for the portfolio of
all positions assigned to trading desks for which the institution calculates the own funds requirements for
market risks in accordance with the alternative internal model approach set out in Part Three, Title IV,
Chapter 1b of Regulation (EU) No 575/2013;
IMA = the own funds requirements for market risks calculated in accordance the alternative internal model
ima
approach set out in Part Three, Title IV, Chapter 1b of Regulation (EU) No 575/2013 for the portfolio of
all positions assigned to trading desks for which the institution calculates the own funds requirements in
accordance with Part Three, Title IV, Chapter 1b of Regulation (EU) No 575/2013.
2. For the purposes of paragraph 1, the coefficient k shall be calculated in accordance with the following formula:
∑
SA
k¼0,5• iєNG i
∑
SA
iєima i
Where:
SA = the own funds requirements for market risks calculated in accordance with the alternative standardised
i
approach set out in Part Three, Title IV, Chapter 1a of Regulation (EU) No 575/2013 for all the
positions attributed to trading desk ‘I’;
iєNG= the indices of all trading desks that have been classified as red, orange or yellow zone desks in accordance
with Article 9 of this Regulation among those for which the own funds requirements for market risks are
calculated in accordance with the alternative internal model approach set out in Part Three, Title IV,
Chapter 1b of Regulation (EU) No 575/2013;
iєima= the indices of all trading desks for which the own funds requirements for market risks are calculated in
accordance with the alternative internal model approach set out in Part Three, Title IV, Chapter 1b of
Regulation (EU) No 575/2013.
3. Institutions calculating the own funds requirements for market risks in accordance with the alternative internal model
approach set out in Part Three, Title IV, Chapter 1b of Regulation (EU) No 575/2013 for positions assigned to trading desks
that have been classified as red or orange zone desks in accordance with Article 9 of this Regulation shall inform the
competent authority thereof when reporting the results of the profit and loss attribution requirement in accordance with
Article 325az(2), point (d), of Regulation (EU) No 2013/575.26.10.2022 EN Official Journal of the European Union L 276/57
Article 11
Frequency of the assessment of compliance with the profit and loss attribution requirement
Institutions shall assess compliance with the profit and loss attribution requirement on a quarterly basis for all trading desks
for which those institutions have the permission referred to in Article 325az(2) of Regulation (EU) No 575/2013 to
calculate the own funds requirements using internal models.
Section 2
Technical elements to be included in the theoretical and hypothetical changes in a trading desk
portfolio’s value for the purposes of the profit and loss attribution requirement
Article 12
Technical elements to be included in the theoretical changes in the trading desk portfolio’s value
1. For the purposes of Article 325bg of Regulation (EU) No 575/2013, institutions shall calculate the theoretical
changes in a trading desk portfolio value based on a comparison between the portfolio’s end-of-day value and, assuming
unchanged positions in the trading desk portfolio, the value of that portfolio at the end of the subsequent day.
2. Institutions shall calculate the theoretical changes in a trading desk portfolio by using the same techniques, including
the same pricing methods, model parametrisations and market data as those used in the risk measurement model.
3. Theoretical changes in a trading desk portfolio value shall only include the changes in the value of all risk factors
included in the risk-measurement model to which institutions apply the scenarios of future shocks.
Article 13
Technical elements to be included in the hypothetical changes in a trading desk portfolio’s value for the profit and
loss attribution requirement
For the purposes of Article 325bg of Regulation (EU) No 575/2013, institutions shall calculate hypothetical changes in a
trading desk portfolio’s value in accordance with Article 3 of this Regulation.
Article 14
Alignment of data for the profit and loss attribution requirements
1. For the purposes of Article 325bg of Regulation (EU) No 575/2013, institutions may replace the value of input data
for a given risk factor used in the calculation of the theoretical changes in the trading desk portfolio’s value with the value of
the input data of the same nature for the same risk factor used in the calculation of the hypothetical changes in the trading
desk portfolio’s value, provided either of the following conditions is met:
(a) differences in the input data are due to the fact that the data are sourced from different data providers;
(b) differences in the input data are due to the fact that the input data are extracted from the market data source at different
times during the same business day.L 276/58 EN Official Journal of the European Union 26.10.2022
2. For the purposes of Article 325bg of Regulation (EU) No 575/2013, institutions may replace the value of a risk factor
used in the calculation of the theoretical changes in the trading desk portfolio’s value with the value of the same risk factor
used in the calculation of the hypothetical changes in the trading desk portfolio’s value where all of the following
conditions are met:
(a) the risk factor used in the calculation of the hypothetical changes in the trading desk portfolio’s value does not directly
correspond to the input data;
(b) the risk factor has been derived from the input data using techniques of the valuation systems used for the hypothetical
changes in the trading desk portfolio’s value;
(c) none of the techniques of the valuation systems referred to in point (b) have been rebuilt in the valuation systems used
in the risk measurement model in order to derive the value of the risk factor which is used in the calculation of the
theoretical changes in the trading desk portfolio’s value.
Article 15
Documentation requirements
1. Institutions shall have in place policies and procedures setting out how they calculate the theoretical changes in
accordance with Articles 12 and 14 of this Regulation, which shall contain an explanation of how the theoretical changes
in the trading desk portfolio’s value are calculated for modellable and non-modellable risk factors.
2. When designing the procedures for aligning the data as referred to in Article 14 of this Regulation, institutions shall
apply both of the following:
(a) they shall compare the theoretical changes in the trading desk portfolio’s value without the alignments referred to in
Article 14 of this Regulation with the theoretical changes in the trading desk portfolio’s value with the alignments
referred to in Article 14 of this Regulation, and they shall document that comparison;
(b) they shall assess the effect of the alignments on the metrics of the tests used for assessing compliance with the profit
and loss attribution requirement referred to in Articles 7 and 8 of this Regulation and document that assessment.
3. Institutions shall document any adjustments, performed in accordance with Article 14 of this Regulation, to the input
data for the risk factors within the calculation of the theoretical changes in the trading desk portfolio, as well as the
rationale for such adjustments.
Section 3
Own funds requirements calculated in accordance with the alternative internal model approach
Article 16
Calculation of the own funds requirements for market risk under the alternative internal model approach for
institutions having trading desks
Institutions calculating the own funds requirements for market risks in accordance with the alternative internal model
approach set out in Part Three, Title IV, Chapter 1b of Regulation (EU) No 575/2013 for the positions assigned to some of
their trading desks shall calculate the own funds requirements for all their trading book positions and all their non-trading
book positions generating foreign exchange or commodity risks as the sum of the results of the formulas set out in points
(a) and (b) as follows:
(a) minfIMA þCapital surchargeþ C ;SA g
ima U alldesks
(b) maxfIMA – SA ;0g
ima ima26.10.2022 EN Official Journal of the European Union L 276/59
Where:
IMA = IMA as specified in Article 10 of this Regulation;
ima ima
SA = SA as specified in Article 10 of this Regulation;
ima ima
Capital surcharge= the capital surcharge calculated in accordance with Article 10 of this Regulation;
C = the own funds requirements calculated in accordance with Part Three, Title IV, Chapter 1a of
U
Regulation (EU) No 575/2013 for the portfolio of positions not assigned to trading desks for
which institutions calculate the own funds requirements for market risks in accordance with the
alternative internal model approach set out in Part Three, Title IV, Chapter 1b, of Regulation (EU)
No 575/2013;
SA = the own funds requirements for market risks of all trading book positions and all non-trading
all desks
book positions generating foreign exchange or commodity risks in accordance with the
alternative internal model approach set out in Part Three, Title IV, Chapter 1a of Regulation (EU)
No 575/2013.
Article 17
Entry into force
This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the
European Union.
This Regulation shall be binding in its entirety and directly applicable in all Member States.
Done at Brussels, 14 June 2022.
For the Commission
The President
Ursula VON DER LEYEN