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Financial Services Advisory
EBA Handbook on Supervisory Benchmarking
Contents
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Recently we published a Summary Report on the 2022 EBA Credit Risk Benchmarking Exercise, detailing an overview of the Market Risk and Credit Risk findings and conclusions.
On March 16th the EBA published a Handbook on supervisory benchmarking for internal models. The Handbook provides details on key elements of the credit risk data submission, and an overview of all applicable Q&As relevant to credit risk, market risk and IFRS 9.
The annual benchmarking exercise is an essential supervisory tool to enhance the quality of internal models and to monitor the variability of the RWAs for institutions applying the IRB approach.
Overview of the Benchmarking Exercise
- Art. 78 of Capital Requirements Directive (CRD) forms the legal basis for the annual benchmarking exercise. The Implementing Technical Standards (ITS) package for the 2023 benchmarking exercise sets out the benchmarking portfolios and reporting instructions (including data requirements) to be applied for the exercise.
- The ITS is composed of a legal act and 9 Annexes. Annex I-IV applies to credit risk, Annex V-VII applies to market risk and Annex I, II, VIII and IX apply to IFRS 9.
Credit Risk Data Templates
- The deadline for the credit risk data submission is 11th April. The relevant data templates are submitted to the ECB, who revert in case re-submissions are necessary.
- The data fields required for the benchmarking exercise are often fields referenced in other reporting obligations such as COREP and FINREP.
- An overview of the relevant Annexes is given below:
| Annex I |
Defines the benchmarking portfolios/counterparties to be used for submitting the data fields specified in the relevant templates in Annex III (for credit risk) and in the templates in Annex VIII (for IFRS9) |
| Annex II |
A word file that provides clarification of concepts used to define counterparties and portfolios given in Annex I |
| Annex III |
Contains the actual parameters and metrics that institutions are to report for the portfolios defined in Annex I. |
| Annex IV |
Provides the definitions and descriptions relevant for Annex III. Also Instructions on how to deal with fields that are not known or zero is provided in Part I of Annex IV. |
How can Grant Thornton help?
The EBA Benchmarking templates are a time-consuming exercise based on non-flexible templates. Grant Thornton has extensive experience in the population of these reporting templates, including review of data quality of submitted supervisory templates through our engagements with the regulator.
We have experience in the automisation of reporting templates via our off-the-shelf reporting toolkits. The solution enables banks to run repeatable template executions across numerous portfolios, including future iterations of the exercise.
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Authors
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Dwayne Price Dwayne joined Grant Thornton in 2016 as partner to head our Regulatory Advisory Services offering. Dwayne leads the firm’s risk and regulatory offering focusing on Quantitative Risk Advisory, Regulatory Risk and Strategy, and Regulatory Support services.View Profile