Financial Services (Investment and Fiduciary Services)
FINANCIAL SERVICES (CAPITAL ADEQUACY OF INVESTMENT
FIRMS) REGULATIONS 2007 The Authority may, in individual cases and owing to an exceptional situation, waive the requirement to increase the multiplication factor by the ‘plus- factor’ in accordance with Table 1, if the investment firm has demonstrated to the satisfaction of the Authority that such an increase is unjustified and that the model is basically sound.
If numerous overshootings indicate that the model is not sufficiently accurate, the Authority shall revoke the model’s recognition or impose appropriate measures to ensure that the model is improved promptly.
In order to allow Authority to monitor the appropriateness of the plus factor on an ongoing basis, investment firms shall notify it promptly, and in any case no later than within five working days, of overshootings that result form their back-testing programme and that would according to the above table imply an increase of a plus factor.
The calculation of the value-at-risk measure shall be subject to the
following minimum standards–
at least daily calculation of the value-at-risk measure;
a 99th percentile, one-tailed confidence interval;
a 10-day equivalent holding period (institutions may use value-
at-risk numbers calculated according to shorter holding periods scaled up to 10 days by, for example, the square root of time. An institution using that approach shall periodically justify the reasonableness of its approach to the satisfaction of the competent authority);
an effective historical observation period of at least one year except where a shorter observation period is justified by a significant upsurge in price volatility; and
monthly data set updates.
10a. In addition, each institution shall calculate a “stressed value-at-risk” based on the 10-day, 99th percentile, one-tailed confidence interval value-at- risk measure of the current portfolio, with value-at-risk model inputs calibrated to historical data from a continuous 12-month period of significant financial stress relevant to the institution’s portfolio. The choice of such historical data shall be subject to approval by the competent authority and to annual review by the institution.
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
Repealed Subsidiary 2007/002