Regulatory Alerts2014-07-31
Guidance notice concerning supervisory back-testing of internal market risk models
BaFin and the Deutsche Bundesbank issue this guidance to standardize the supervisory back-testing of internal market risk models under Article 366 of Regulation (EU) No 575/2013. Institutions must daily compare hypothetical and actual portfolio value changes to calculate the supervisory multiplication factor, applying capital addends based on the higher count of recent overshootings. The notice mandates a two-step reporting workflow requiring initial overshooting notifications within five business days, detailed analytical assessments within three weeks, and standardized quarterly electronic time series submissions.
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