in force 2016-07-19 MODIFIED+62 −47§
Amended by Regulation (EU) 2016/1014 32016R1014
applies from: unchanged
Sources disagree — the text comparison found this change; the EU's own amendment metadata does not list it and the amending act's instructions do not mention it. All are shown; none is overruled.
The only visible change is in the formula rendering of the weighted-average Effective EPE calculation in paragraph 6, where the mathematical expression's formatting and layout differ between the two texts without any accompanying change in the surrounding descriptive wording.
Cited: Art. 284, v1 · Art. 284, v2
text before / after
02013R0575-20150118 → 02013R0575-20160719
Article 284
Exposure value
1. Where an institution is permitted, in accordance with Article 283(1), to use the IMM to calculate the exposure value of some or all transactions mentioned in that paragraph, it shall measure the exposure value of those transactions … 360 unchanged words … exposure. If all contracts in the netting set mature within less than one year, EPE shall be the average of EE until all contracts in the netting set mature. Effective EPE shall be calculated as a weighted average of Effective EE:Effective EPEmin 1 year, maturityk1 EE:
Effective EEtk Δ tk EPE1min1year, maturitymin1year, maturityk1Effective EEtkΔtk
where the weights Δtk tk tk 1 allow for the case when future exposure is calculated at dates that are not equally spaced over time.
7. Institutions shall calculate EE or peak exposure measures on the basis of a distribution of exposures that accounts for the possible non-normality of the distribution of exposures.
8. An institution may use a measure of the distribution calculated by the IMM that is more conservative than α multiplied by Effective EPE as calculated in accordance with the equation in paragraph 4 for every counterparty.
9. Notwithstanding paragraph 4, competent authorities may permit institutions to use their own estimates of alpha, where:
(a) alpha shall equal the ratio of internal capital from a full simulation of CCR exposure across counterparties (numerator) and internal capital based on EPE (denominator);
(b) in the denominator, EPE shall be used as if it were a fixed outstanding amount.
When estimated in accordance with this paragraph, alpha shall be no lower than 1,2.
10. For the purposes of an estimate of alpha under paragraph 9, an institution shall ensure that the numerator and denominator are calculated in a manner consistent with the modelling methodology, parameter specifications and portfolio composition. The approach used to estimate α shall be based on the institution's internal capital approach, be well documented and be subject to independent validation. In addition, an institution shall review its estimates of alpha on at least a quarterly basis, and more frequently when the composition of the portfolio varies over time. An institution shall also assess the model risk.
11. An institution shall demonstrate to the satisfaction of the competent authorities that its internal estimates of alpha capture in the numerator material sources of dependency of distribution of market values of transactions or of portfolios of transactions across counterparties. Internal estimates of alpha shall take account of the granularity of portfolios.
12. In supervising the use of estimates under paragraph 9, competent authorities shall have regard to the significant variation in estimates of alpha that arises from the potential for mis-specification in the models used for the numerator, especially where convexity is present.
13. Where appropriate, volatilities and correlations of market risk factors used in the joint modelling of market and credit risk shall be conditioned on the credit risk factor to reflect potential increases in volatility or correlation in an economic downturn.