AI Summary of Article 455 Use of internal models for market risk
The obligations outlined in Article 325az require institutions employing internal models for market risk calculations to provide comprehensive disclosures. This includes their trading objectives, risk management processes, and specifics about trading desks, such as strategies and instruments used. Furthermore, institutions must divulge an overview of positions excluded from internal models and reflect on their governance structures.
Additionally, institutions are mandated to present aggregate data for the last 60 business days, detailing measures such as expected shortfall and stress scenario risk. They are also required to report back-testing outcomes and calculate hypothetical own funds requirements as if internal models were not utilised.
Article 455 Use of internal models for market risk
1. An institution using the internal models referred to in Article 325az for the calculation of the own funds requirements for market risk shall disclose:
(a) its objectives in undertaking trading activities and the processes implemented to identify, measure, monitor and control the market risk;
(b) the policies referred to in Article 104(1) for determining which position is to be included in the trading book;
(c) a general description of the structure of the trading desks covered by the internal models, including for each desk a broad description of the desk's business strategy, the instruments permitted therein and the main risk types in relation to that desk;
(d) an overview of the trading book positions not covered by the internal models, including a general description of the desk structure and of types of instruments included in the desks or in the desk categories in accordance with Article 104b;
(e) the structure and organisation of the market risk management function and governance;