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Repealed by LN. 2013/198 as from 1.1.2014 - page 84 / 94

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1989-47

Repealed Subsidiary 2007/002

Financial Services (Investment and Fiduciary Services)

FINANCIAL SERVICES (CAPITAL ADEQUACY OF INVESTMENT

10b.

FIRMS) REGULATIONS 2007 Each institution shall meet, on a daily basis, a capital requirement

expressed as the sum of points (a) and (b) and an institution that uses its internal model to calculate the capital requirement for specific position risk shall meet a capital requirement expressed as the sum of points (c) and (d),

as follows:

  • (a)

    the higher of:

  • (i)

    its previous day’s value-at-risk number calculated in accordance with point 10 (VaRt-1); and

(ii)

an average of the daily value-at-risk measures in accordance with point 10 on each of the preceding sixty business days (VaRavg), multiplied by the multiplication factor (mc);

(b)

the higher of:

(i)

its latest available stressed-value-at-risk accordance with point 10a (sVaRt-1); and

number

in

    • (ii)

      an average of the stressed value-at-risk numbers calculated in the manner and frequency specified in point 10a during the preceding sixty business days (sVaRavg), multiplied by the multiplication factor (ms);

  • (c)

    a capital charge calculated in accordance with Schedule 1 for the position risks of securitisation positions and nth to default credit derivatives in the trading book with the exception of those incorporated in the capital charge in accordance with point 5l;

(d)

the higher of the institution’s most recent and the institution’s 12 weeks average measure of incremental default and migration risk in accordance with point 5a and, where applicable, the higher of the institution’s most recent and its 12-week-average measure of all price risks in accordance with point 5l.

10c.

Institutions shall also carry out reverse stress tests.

11. The Authority shall require that the model captures accurately all the material price risks of options or option like positions and that any other risks not captured by the model are covered adequately by own funds.

12. The risk-measurement model shall capture a sufficient number of risk factors, depending on the level of activity of the institution in the respective

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