EBA 2024 reports: Market and credit risk benchmarking exercises

The European Banking Authority (EBA) has published its 2024 Reports on the annual market and credit risk benchmarking exercises. Both reports are mandated by Article 78 of the Capital Requirements Directive to assist competent authorities at monitoring the consistency of risk weighted assets (RWAs) across all EU institutions authorised to use internal approaches for the calculation of capital requirements. Regarding market risk, the report summarises the conclusions drawn from a hypothetical portfolio exercise conducted in 2023/24, performed on a sample of 43 European banks from 13 jurisdictions. The results confirm that most participating banks in the exercise have seen a relatively low dispersion in the initial market valuation, though slightly higher compared to 2023. However, there was a decrease in the dispersion of risk measures submissions compared to the previous exercise, as well as variability in general through most exercises, owing to better data submissions by participating banks because of improved instructions, knowledge of the portfolio and the resolution of issues encountered in the previous exercise. The EBA has also released, for the first time, a specific report on the fundamental review of the trading book Alternative Standardised Approach (ASA). This report expands the findings of the market risk report. In the future, benchmarking exercises will be extended to banks that apply the ASA methodology independently of the current requirement to obtain approval to adopt internal models for market risk own funds requirements. For credit risk, the results confirmed that the variability of RWAs remained stable compared to the previous year, but for some asset classes and parameters, a reduction could be observed in the longer run.

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