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Home > Prudential Regulation Authority > Market risk – SS13/13 UPDATE

Market risk – SS13/13 UPDATE

23 February 2017

Update 23 February 2017: This supervisory statement was updated following publication of PS4/17 ‘Responses to CP36/16 and correction to PS2/16 PIN rules’.  See the appendix for full details.

This supervisory statement is aimed at firms to which CRD IV applies.

It sets out the Prudential Regulation Authority’s (PRA’s) expectations of firms in relation to market risk and should be considered in addition to requirements set out in CRD IV Articles 325–377, the Market Risk Part of the PRA Rulebook and the high-level expectations outlined in ‘The PRA’s approach to banking supervision’.

This statement details the PRA’s expectations with regard to the following:

  • Material deficiencies in risk capture by an institution’s internal approach.
  • Standardised approach for options.
  • Netting a convertible with its underlying instrument.
  • Offsetting derivative instruments.
  • Exclusion of back-testing exceptions when determining multiplication factor addends.
  • Derivation of notional positions for standardised approaches.
  • Qualifying debt instruments.
  • Expectations relating to internal models.
  • Value-at-Risk (VaR) and stressed VaR (sVaR) calculation.
  • Requirement to have an internal incremental risk charge (IRC) model.
  • Annual SIF attestation of market risk internal models.

Supervisory statement

Market risk – SS13/13