Regulatory Alerts2025-05-28
Added · Updated
Commission Delegated Regulation (EU) 2022/2060 on criteria for assessing modellability of risk factors under the internal model approach
Institutions must assess the modellability of risk factors by verifying the existence of at least 24 distinct verifiable prices over a 12-month observation period, with no 90-day gap containing fewer than four prices, or alternatively by identifying at least 100 such prices. Verifiable prices are defined as those from arm's length transactions or bona fide competitive bids and offers, excluding internal group trades or negligible volumes, and must be mapped to risk factors using conceptually sound methodologies. For risk factors belonging to curves, surfaces, or cubes, modellability is determined by applying specific bucketing approaches to ensure sufficient price data density within defined maturity or moneyness ranges. Institutions are required to document their assessment criteria, data sources, and mapping processes, and must maintain records of these assessments for at least one year.