AI Summary of Article 325bg Profit and loss attribution requirement
This document outlines the requirements for an institution's trading desk to meet P&L attribution standards, ensuring that theoretical changes in portfolio value closely align with hypothetical changes. It stipulates that when such alignment is established, institutions must calculate an additional own funds requirement.
Furthermore, the European Banking Authority (EBA) is tasked with developing regulatory technical standards to define the criteria for determining sufficient closeness between theoretical and hypothetical values, as well as the frequency of P&L attribution evaluations. These standards are expected to be submitted to the Commission by 10 July 2025.
Article 325bg Profit and loss attribution requirement
1.An institution's trading desk meets the P&L attribution requirements where the theoretical changes in the value of that trading desk's portfolio, based on the institution's risk-measurement model, are either close or sufficiently close to the hypothetical changes in the value of that trading desk's portfolio, based on the institution's pricing model.
2.Notwithstanding paragraph 1 of this Article, where the theoretical changes in the value of a trading desk's portfolio, based on the institution's risk-measurement model, are sufficiently close to the hypothetical changes in the value of that trading desk's portfolio, based on the institution's pricing model, the institution shall calculate, for all positions assigned to that trading desk, an additional own funds requirement to the own funds requirements referred to in Article 325ba(1) and (2).
3.On the basis of the results of the P&L attribution requirement referred to in paragraph 1 of this Article, an institution shall determine and document a precise list of risk factors included in the institution's risk-measurement model that are deemed appropriate for verifying the institution's compliance with the back-testing requirement set out in Article 325bf. The institution shall track any change to the list of those risk factors.