Question
Do validation rules v1906_h and v1907_h have to be modified?
Background on the question
The validation rules require that the VaR for general risk and the VaR for specific risk add up exactly to the total VaR both for equities (v1907_h) and traded debt instruments (TDI, v1907_h) respectively: v1906_h: C 24.00, columns (030;040;050;060): {r020} = {r030} + {r040} v1907_h: C 24.00, columns (030;040;050;060): {r050} = {r060} + {r070} In the instructions for the row 1ctotal positions 1d (r010) of C 24.00 (MKR IM) it is noted that "concerning the columns 030 to 060 (VAR and Stress-VAR), the figures in the total row are not equal to the decomposition of the figures for the VAR/Stress-VAR of the relevant risk components." The same holds also true for the decomposition of equity / TDI risk-VaRs into general and specific risk. The reason for this is that correlations between risk categories may be taken into account when calculating the total VaR for equities / TDI (see for example Article 367 (3) CRR which explicitly mentions this possibility). The "aggregate" VaR for equity / TDI risk may therefore be different from the simple sum of the decomposed VaRs.
Answer
Validation rules v1906_h and v1907_h of Annex XV of Regulation (EU) No 680/2014 - ITS on reporting will be replaced by manual validation rules with "=" as operator, i.e. the new validation rules will read:v1906_m: C 24.00, columns (030;040;050;060): {r020} = {r030} + {r040}v1907_m: C 24.00, columns (030;040;050;060): {r050} = {r060} + {r070}.