Capital requirements for market risks
In addition to credit risks (counterparty risks) and operational risks, under Regulation No 575/2013 (CRR) market risks also have to be backed by own funds. Market risks include an institution’s foreign exchange risks and commodity risks as well as position risks (interest rate risks and equity risks) in the trading book.
For each of these types of market risk the CRR provides standard methods for calculating own funds requirements. As alternatives to the standard methods, an institution may also, subject to authorisation from the supervisors, use its internal risk measurement model.
updated on 22.03.2016