The EBA publishes its annual assessment of banks’ internal approaches for the calculation of capital requirements

The European Banking Authority (EBA) today published its 2024 Reports on the annual market and credit risk benchmarking exercises. For the first time, the EBA also released a specific Report on the fundamental review of the trading book Alternative Standardised Approach (FRTB ASA). These exercises aim 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 decline in the dispersion in the various risk measure is confirmed for this exercise. For credit risk, the variability of RWAs remained stable compared to the previous year, but for some asset classes a reduction could be observed in the longer run for some asset classes and parameters. Market Risk The Market Risk Benchmarking IMA Report presents the results of the 2024 supervisory benchmarking and summarises the conclusions drawn from a hypothetical portfolio exercise (HPE) conducted in 2023/24. The results confirm that most participating banks have seen a relatively low dispersion in the initial market valuation (IMVs), though slightly higher compared to 2023. However, a decline in the dispersion in risk measures submissions was noticed compared to the previous exercise. In general, variability has declined constantly through past exercises. This is likely due to better data submissions by the participating banks, as a result of improved instructions, knowledge of the portfolios...