contents table Lexparency.org
Capital Requirements Regulation (CRR)
Article 325bd

Article 325bd — Liquidity horizons

  1. Institutions shall map each risk factor of positions assigned to the trading desks for which they have been granted permission as referred to in Article 325az(2), or for which they are in the process of being granted such permission, to one of the broad categories of risk factors listed in Table 2 and to one of the broad sub-categories of risk factors listed in that Table.
  2. The liquidity horizon of a risk factor of the positions referred to in paragraph 1 shall be the liquidity horizon of the corresponding broad sub-category of risk factors to which it has been mapped.
  3. By way of derogation from paragraph 1 of this Article, for a given trading desk, an institution may decide to replace the liquidity horizon of a broad sub-category of risk factors listed in Table 2 of this Article with one of the longer liquidity horizons listed in Table 1 of Article 325bc. Where an institution takes such a decision, the longer liquidity horizon shall apply to all the modellable risk factors of the positions assigned to that trading desk that have been mapped to that broad sub-category of risk factors for the purpose of calculating the partial expected shortfall measures in accordance with point (c) of Article 325bc(1).

    An institution shall notify the competent authorities of the trading desks and the broad sub-categories of risk factors to which it decides to apply the treatment referred to in the first subparagraph.

  4. For the purpose of calculating the partial expected shortfall measures in accordance with point (c) of Article 325bc(1), the effective liquidity horizon of a given modellable risk factor of a given trading book position shall be calculated as follows:
    EffectiveLH = SubCatLH if Mat > LH5
    min (SubCatLH, minj{LHj/LHj ≥ Mat}) if LH1 ≤ Mat ≤ LH5
    LH1 if Mat < LH1

    where:

    • EffectiveLH = the effective liquidity horizon;
    • Mat = the maturity of the trading book position;
    • SubCatLH = the length of liquidity horizon of the modellable risk factor determined in accordance with paragraph 1; and
    • minj {LHj/LHj ≥ Mat} = the length of one of the liquidity horizons listed in Table 1 of Article 325bc which is the nearest liquidity horizon above the maturity of the trading book position.
  5. Currency pairs that are composed of the euro and the currency of a Member State participating in ERM II shall be included in the most liquid currency pairs sub-category within the broad category of foreign exchange risk factor of Table 2.
  6. An institution shall verify the appropriateness of the mapping referred to in paragraph 1 on at least a monthly basis.
  7. EBA shall develop draft regulatory technical standards to specify:
    1. how institutions are to map the risk factors of the positions referred to in paragraph 1 to broad categories of risk factors and broad sub-categories of risk factors for the purposes of paragraph 1;
    2. which currencies constitute the most liquid currencies sub-category of the broad category of interest rate risk factor of Table 2;
    3. which currency pairs constitute the most liquid currency pairs sub-category of the broad category of foreign exchange risk factor of Table 2;
    4. the definitions of small market capitalisation and large market capitalisation for the purposes of the equity price and volatility sub-category of the broad category of equity risk factor of Table 2.

    EBA shall submit those draft regulatory technical standards to the Commission by 28 March 2020.

    Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

    Table 2
    Broad categories of risk factorsBroad sub-categories of risk factorsLiquidity horizonsLength of the liquidity horizon (in days)
    Interest rateMost liquid currencies and domestic currency110
    Other currencies (excluding most liquid currencies)220
    Volatility460
    Other types460
    Credit spreadCentral government, including central banks, of Member States220
    Covered bonds issued by credit institutions in Member States (Investment Grade)220
    Sovereign (Investment grade)220
    Sovereign (High yield)340
    Corporate (Investment grade)340
    Corporate (High yield)460
    Volatility5120
    Other types5120
    EquityEquity price (Large market capitalisation)110
    Equity price (Small market capitalisation)220
    Volatility (Large market capitalisation)220
    Volatility (Small market capitalisation)460
    Other types460
    Foreign exchangeMost liquid currency pairs110
    Other currency pairs (excluding most liquid currency pairs)220
    Volatility340
    Other types340
    CommodityEnergy price and carbon emissions price220
    Precious metal price and non-ferrous metal price220
    Other commodity prices (excluding energy price, carbon emissions price, precious metal price and non-ferrous metal price)460
    Energy volatility and carbon emissions volatility460
    Precious metal volatility and non-ferrous metal volatility460
    Other commodity volatilities (excluding energy volatility, carbon emissions volatility, precious metal volatility and non-ferrous metal volatility)5120
    Other types5120