Question
Under current (No FRTB) Own Funds Requirements (OFR) framework for Market Risk. A bank composed by a parent entity in Europe and a subsidiary in a third country. With approved use of Internal Model Approach for all risk factors where no offsetting of positions is allowed between both entities (parent and subsidiary) and not permission described in article 325 of CRR granted. Some residual risks calculated under Standardized Approach. So, according with the IMA permission and TRIM guides, the OFR calculation for market risk at consolidated level is the addition of 4 elements: OFR under IMA for parent + OFR under IMA for subsidiary + OFR under SA for parent + OFR under SA for subsidiary. For the subsidiary, the OFR calculation are performed in local currency (reporting currency in that jurisdiction) and then converted to EUR (group reporting currency) for consolidation. The required Banking Book positions (i.e. FX and commodities) are capitalized for market risk under this schema. Is this calculation compliant with CRR (current version of OFR, not FRTB reporting and future OFR)?
Background on the question
According with the IMA permission and TRIM guides, the OFR calculation for market risk at consolidated level is the addition of 4 elements: OFR under IMA for parent + OFR under IMA for subsidiary + OFR under SA for parent + OFR under SA for subsidiary. For the subsidiary, the OFR calculation are performed in local currency (reporting currency in that jurisdiction) and then converted to EUR (group reporting currency) for consolidation. The required Banking Book positions (i.e. FX and commodities) are capitalized for market risk under this schema.
Answer
This question has been rejected because the matter it refers to is in the process of being answered inQ&A 7194.