Regulatory Alerts2022-06-14
Added · Updated
Commission Delegated Regulation (EU) 2022/2060 on criteria for assessing modellability of risk factors under the internal model approach
The European Commission adopts regulatory technical standards specifying the criteria for institutions to assess the modellability of risk factors under the internal model approach (IMA) and the frequency of such assessments. Institutions must determine if risk factors are modellable based on the availability of at least 24 or 100 verifiable prices over a 12-month observation period, applying specific thresholds for non-curve factors and bucket-based assessments for curves, surfaces, or cubes. The regulation defines verifiable prices as those from arm's length transactions or audited third-party vendors, excluding collateral reconciliations and intra-group trades, and mandates consistent documentation and audit procedures for competent authorities.