Technical elements to be included in the actual changes in a trading desk portfolio’s value for the back-testing requirements performed at trading desk level
Article 1
Open ↗1. For the purposes of the trading desk back-testing referred to in Article 325bf(3) of Regulation (EU) No 575/2013, institutions shall calculate the actual changes in a trading desk portfolio’s value by using the same techniques, including the same pricing methods, model parametrisations and market data, as those used in the process used to calculate the end-of-day values (‘end-of-day valuation process’), including the results of the independent price verification referred to in Article 105(8) of Regulation (EU) No 575/2013. 2. When calculating the actual changes in a trading desk portfolio’s value, institutions shall reflect the changes in the value of that portfolio that are due to the passage of time. 3. When calculating the actual changes in a trading desk portfolio’s value, institutions shall include in that value all those adjustments that have been considered in the end-of-day valuation process referred to in paragraph 1 and that are market risk related, with the exception of all of the following adjustments: (a) credit valuation adjustments reflecting the current market value of the credit risk of counterparties to the institution; (b) adjustments attributed to the institution’s own credit risk that have been excluded from own funds in accordance with Article 33(1), point (b) or (c), of Regulation (EU) No 575/2013; (c) additional value adjustments deducted from Common Equity Tier 1 capital in accordance with Article 34 of Regulation (EU) No 575/2013. 4. Institutions shall calculate the value of an adjustment as referred to in paragraph 3 on the basis of all positions that are assigned to the same trading desk. Institutions shall include changes in the adjustment’s value only on the date on which the adjustment is calculated. 5. In addition to the exclusions laid down in paragraph 3, points (a), (b), and (c), institutions may exclude from the calculation of the actual changes in a trading desk portfolio’s value an adjustment that is calculated in the end-of-day valuation process across sets of positions assigned to more than one trading desk on a net basis, where all of the following conditions are met: (a) that adjustment is, due to its nature, calculated on a net basis across sets of positions that are assigned to more than one trading desk; (b) the internal risk management of that adjustment is consistent with the level at which the adjustment is calculated; (c) the institution concerned documents all of the following: (i) the sets of positions across which the adjustment is calculated; (ii) the reasoning underpinning the calculation of the adjustment across the sets of positions referred to in point (i); (iii) the justification for not calculating the adjustment on the basis of positions assigned to that trading desk only.