Article 224 of Regulation (EU) No 575/2013 (CRR) does not provide an explicit formula for calculating volatility adjustments in cases where the liquidation period differs from the ones used in the tables in paragraph 1 of that article. For the transactions listed in Article 224(2) of the CRR, this is not an issue, as the liquidation periods for those transactions are fixed and they coincide with the liquidation periods used in the tables in paragraph 1.

However, an institution may engage in transactions other than those listed in Article 224(2) of the CRR and which have liquidation periods different from those used in Article 224(1). For such cases, institutions cannot determine the applicable volatility adjustment by simply looking at the tables in Article 224(1) of the CRR. Nevertheless, those tables still provide an indication of how institutions should proceed in such cases. Indeed, by examining the tables it can be seen that the volatility adjustments provided therein have been calculated by applying the formula in Article 225(2)(c) of the CRR, using the volatility adjustment for a 10-day liquidation period as the reference and rounding the result to the third decimal place.

In view of the above, for transactions which are not captured by Article 224(2) of the CRR and which have liquidation periods different from those used in Article 224(1), institutions should use the formula in Article 225(2)(c) to adjust the supervisory volatility adjustments provided in the tables in Article 224(1) when faced with liquidation periods that differ in length compared to those laid down in those tables.

DISCLAIMER:

This question goes beyond matters of consistent and effective application of the regulatory framework. A Directorate General of the Commission (Directorate General Financial Stability, Financial Services and Capital Markets Union) has prepared the answer, albeit that only the Court of Justice of the European Union can provide definitive interpretations of EU legislation. This is an unofficial opinion of that Directorate General, which the European Banking Authority publishes on its behalf. The answers are not binding on the European Commission as an institution. You should be aware that the European Commission could adopt a position different from the one expressed in such Q&As, for instance in infringement proceedings or after a detailed examination of a specific case or on the basis of any new legal or factual elements that may have been brought to its attention.