Version status: Inserted | Document consolidation status: Updated to reflect all known changes
Version date: 27 June 2019 - onwards
    Version 1 of 1    

Article 325bn Own funds requirements for default risk using an internal default risk model

1. Institutions shall calculate the own funds requirements for default risk using an internal default risk model for the portfolio of all trading book positions as referred to in Article 325bl as follows:

(a) the own funds requirements shall be equal to a value-at-risk number measuring potential losses in the market value of the portfolio caused by the default of issuers related to those positions at the 99,9 % confidence interval over a one-year time horizon;

(b) the potential loss referred to in point (a) means a direct or indirect loss in the market value of a position which was caused by the default of the issuers and which is incremental to any losses already taken into account in the current valuation of the position; the default of the issuers of equity positions shall be represented by the value for the issuers' equity prices being set to zero;

(c) institutions shall determine default correlations between different issuers on the basis of a conceptually sound methodology, using