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EBF response to ECB consultation on materiality assessment
for changes to counterparty credit risk models
EBF advisor: Sarah Schmidtke
Publication date: 10 February 2017
- We welcome the ECB’s draft Guidance on the Materiality Assessment (EGMA) for IMM and A-CVA model extensions and changes.
- We think that the requests for model changes/extensions should be supported by rigorous analyses proving their need, but the regulation should not hinder the industry in the enhancement of the models. Excessive approval constraints discourage investment in the development of new risk management tools or, even worse, lead to a divergence between regulatory and internal risk measurement.
- It is our understanding that several different extensions or changes of the same materiality may be merged into one change regarding the quantitative impact assessment. This would considerably reduce complexity and allow implementation without delays. We seek clarification if this understanding is correct.
- Finally, we seek clarification that any adjustments to IRB parameter that result in a change in RWA for CCR are excluded from the requirements in the EGMA paper.