Market risk

Supervisory Statement 13/13

Update 29 March 2018

SS13/13 was updated following the publication of Policy Statement 6/18 ‘Responses to CP18/17 Occasional Consultation Paper – Chapter 2 to 6, 9 and 10’. This version of SS13/13 is effective from Friday 30 March 2018.

PDFSupervisory Statement 13/13 - March 2018

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.

PDF Supervisory Statement 13/13 - February 2017 

Update 7 July 2016

This statement was updated to amend the expectations on the validation of firms’ risks not In VaR (RNIV) frameworks and reporting of extensions and changes to firms’ RNIV frameworks, and also provides clarification on the PRA’s reporting requirements around Internal Model Approach (IMA) model changes and extensions. In addition, the process for informing the PRA with regard to non-compliance has been clarified. There are changes to paragraphs 2.2, 9.16, and 12.1. Paragraphs 2.10 to 2.12, and paragraph 12.3 are new. In addition, Chapters 3A and 3B have been added in a way to maintain the integrity of the numbering of the chapters and paragraphs in the previous version of this statement.

Additionally amendments were made to bring attention to the PRA’s expectations for firms applying for: the use of own estimates of delta in the standardised approach for options; the use of sensitivity models under Article 331 of the Capital Requirements Regulation (CRR); and the exclusion of positions from the calculation of net open currency positions under Article 352(2) of the CRR. The amendments clarify the criteria expected of firms to satisfy the standards set out in the relevant CRR articles. These revisions are found in paragraphs 3.1, 3.2, and Chapters 3A and 3B. 

The policy contained in this PS has been designed in the context of the current UK and EU regulatory framework. The PRA will keep the policy under review to assess whether any changes would be required due to changes in the UK regulatory framework, including changes arising once any new arrangements with the European Union take effect.

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

PDF Supervisory Statement 13/13 - July 2016 

Update 27 October 2014
 

PDF Supervisory Statement 13/13 - October 2014 

Published on 19 December 2013

This supervisory statement 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 rules 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 backtesting 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; and
  • Annual SIF attestation of market risk internal models.

PDF Supervisory Statement 13/13 

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