The EBA publishes its final draft technical standards on extraordinary circumstances for continuing the use of internal models for market risk

The European Banking Authority (EBA) published its final draft Regulatory Technical Standards (RTS) clarifying the extraordinary circumstances for continuing the use of internal models and disregarding certain overshootings in accordance with the Fundamental Review of the Trading book (FRTB) framework

Under the Capital Requirements Regulation (CRR), competent authorities may permit institutions to derogate from certain requirements for the use of internal models in accordance with the FRTB, or apply a softer version of those requirements, under extraordinary circumstances.

The occurrence of extraordinary circumstances will be determined by the EBA, which must issue an opinion to that effect. The RTS published today set out the conditions and indicators that the EBA shall use to determine whether extraordinary circumstances have occurred.

Legal basis

The draft RTS have been developed in accordance with Article 325az(10) of Regulation (EU) No 575/2013, as amended by Regulation (EU) 2024/1623 (‘CRR3’).