On June 1, 2016, a Commission Delegated Regulation was published in the Official Journal of the European Union correcting two Commission Delegated Regulations under the Capital Requirements Regulation and CRD. The Regulation corrects a previous Commission Delegated Regulation supplementing the CRR with regard to the Regulatory Technical Standards for non-delta risk of options in the standardized market risk approach. Under the CRR, the EBA is empowered to develop a range of methods to reflect non-delta risks in the own funds requirements of firms in a manner proportionate to the scale and complexity of firms' activities in options and warrants. One approach to measure non-delta risks of options and warrants is the "simplified approach." The EBA developed draft RTS accordingly, under which institutions that exclusively purchased options and warrants were obliged to use the simplified approach and did not prevent other institutions from using this approach. The correction states that only institutions that exclusively purchase options and warrants may use the simplified approach, which removes the obligation on such firms to only use the simplified approach and prevents other firms from using it.
The Regulation also corrects a Commission Delegated Regulation supplementing the CRD with respect to qualitative and appropriate quantitative criteria used to identify categories of staff whose professional activities have a material impact on the firm's risk profile. The CRD requires firms to identify all members of staff whose professional activities have a material impact on the institution's risk profile. The Commission Delegated Regulation was corrected to qualify any staff whose total remuneration takes them into the same remuneration brackets as senior management and risk takers as "material risk takers," in other words those whose professional activities have a material impact on the firm's risk profile.
The Regulation entered into force on June 2, 2016.
The Regulation is available at: http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32016R0861&from=EN.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
