AI Summary of Article 325c Scope, structure and qualitative requirements of the alternative standardised approach
This document outlines crucial requirements for institutions under regulatory scrutiny regarding market risk management. Institutions must establish documented policies and controls for compliance, with all changes communicated to competent authorities in a timely manner. The calculation of own funds requirements for market risk should follow a specified alternative standardised approach, ensuring all components are duly accounted for, including considerations for proprietary debt instruments.
A robust risk control unit, independent from trading operations, must oversee compliance and risk assessments, while annual reviews by internal or third-party auditors are mandated to confirm the integrity of risk reporting and data sourcing practices. Competent authorities are tasked with verifying these processes to maintain regulatory compliance.
Article 325c Scope, structure and qualitative requirements of the alternative standardised approach
1. Institutions shall have in place, and make available to the competent authorities, a documented set of internal policies, procedures and controls for monitoring and ensuring compliance with the requirements of this Chapter. Any changes to those policies, procedures and controls shall be notified to the competent authorities in due course.
2. Institutions shall calculate the own funds requirements for market risk in accordance with the alternative standardised approach for a portfolio of trading book positions or non-trading book positions that are subject to foreign exchange or commodity risk as the sum of the following three components:
(a) the own funds requirement under the sensitivities-based method set out in Section 2;
(b) the own funds requirement for the default risk set out in Section 5 which is only applicable to the trading book positions referred to in that Section;
(c) the own funds requirement for residual risks set out in Section 4 which is only applicable to the trading book positions referred to in that Section.