PwC's Managing upstream risk: Regulatory reform review - An asian perspective December 2013 | Page 20

The ISDA SIMM Committee has identified the
following key criteria that a candidate model for
SIMM should satisfy:
Criteria

Description

Non-procyclical

Calculation can provide contribution of
different components to enable effective
dispute resolution

Quick to calculate

Low analytical overhead to enable quick
calculations and re-runs of calculations
as needed by participants

Extensible

Methodology is conducive to addition
of new risk factors and/or products as
required by the industry and regulators

Predictability

IM demands need to be predictable to
preserve consistency in pricing and to
allow participants to allocate capital
against trades

Costs

Reasonable operational costs and
burden on industry, participants, and
regulators

Governance

Recognises appropriate roles and
responsibilities between regulators and
industry

Margin
appropriateness

Use with large portfolios does not
result in vast overstatements of risk.
Recognition of risk factor offsets within
the same asset class.

Easy to replicate calculations performed
by a counterparty, given the same inputs
and trade populations

Transparency

Update

Margins are not subject to continuous
change due to changes in market
volatility

Ease of replication

2.7 Regulatory Technical Standards

20

Regulatory Reform Review | Banking

On 12 December 2013 EBA published for
consultation:
• Draft RTS on the methodology for the
identification of G-SIIs;
• Draft ITS on uniform formats and date for
the disclosure of the values of the indicators
used for determining the score of the
institutions identified as G-SIIs; and
• Guidelines on formats and date for the
disclosure of the values of the indicators
used for the identification of G-SIIs.

Pursuant to Article 131(1) of Directive
2013/36/EU competent or designated
authorities in the Member States will identify
European banks representing a higher risk
for the global financial system as G-SIIs. For
G-SIIs, higher own funds requirements will
apply, depending on their systemic relevance
according to which they will be allocated
to subcategories. Each year Member States’
authorities will calculate an individual score
to measure a bank’s systemic significance. The
Directive defines five categories of indicators
to be used in this scoring process, and the draft
RTS specify 12 (sub)-indicators falling under
these categories. In addition, authorities are
required to apply the same parameters for the
calculation and the allocation to subcategories:
for each year, a sample of large European and
non-European banks’ ‘denominators’ calculated
on the basis of indicator data of the banks in the
sample to normalise the indicator values and
make the scores comparable, and cut-off scores
between the subcategories. The consultation
will close for comments on 28 February 2014.