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Version date: 26 November 2020 - onwards

MAR40 Simplified standardised approach (paras. 40.1-40.86) (effective as of 1 January 2023)

This chapter sets out a simplified standardised approach for calculating risk-weighted assets for market risk.

Version effective as of 01 Jan 2023

First version in the format of the consolidated framework updated to take account of the revised implementation date announced on 27 March 2020. Also, cross references to the securitisation chapters updated to include a reference to the chapter on NPL securitisations (CRE45) published on 26 November 2020.

Risk-weighted assets and capital requirements

40.1 The risk-weighted assets for market risk under the simplified standardised approach are determined by multiplying the capital requirements calculated as set out in this chapter by 12.5.

(1) MAR40.3 to MAR40.73 deal with interest rate, equity, foreign exchange (FX) and commodities risk.

(2) MAR40.74 to MAR40.86 set out a number of possible methods for measuring the price risk in options of all kinds.

(3) The capital requirement under the simplified standardised approach will be the measures of risk obtained from MAR40.2 to MAR40.86, summed arithmetically.

40.2 The capital requirement arising from the simplified standardised approach is the simple sum of the recalibrated capital requirements arising from each of the four risk classes - namely interest rate risk, equity risk, FX risk and commodity risk as detailed in the formula below, where: