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PD-1.3.31

All banks using internal models for their trading portfolios must disclose the following:

(a) The general qualitative disclosure requirement (PD-1.3.21) for market risk identifying the portfolios covered by the IMA. In addition, a discussion of the extent of, and methodologies for, compliance with the "Prudent valuation guidance" for positions held in the trading book (see Section CA-8.2);
(b) An explanation and articulation of the internal criteria on which the bank's internal capital adequacy assessment is based. It should include a description of the methodologies used to achieve a capital adequacy assessment that is consistent with the soundness standards;
(c)
•   A description of the models used for each portfolio covered by the IMA, including assumptions used in calculating (e.g. confidence level, holding period, etc.);
•   A description of stress testing applied to each IMA portfolio; and
•   A description of the approach used for back-testing/validating the accuracy and consistency of the internal models and modelling processes;
(d) A disclosure of the scope of model acceptance by the CBB;
(e) For the incremental risk capital charge and the comprehensive risk capital charge the methodologies used and the risks measured through the use of internal models. Included in the qualitative description should be:
• The approach used by the bank to determine liquidity horizons;
• The methodologies used to achieve a capital assessment that is consistent with the required soundness standard; and
• The approaches used in the validation of the models;
(f) Summarised quantitative information about price-related market risk to equity and commodity markets where banks use the IMA. These disclosures should include the magnitude of the exposure on a weekly or monthly basis (during the reporting period);
(g) For trading portfolios under the IMA:
•   The high, mean and low VaR values over the reporting period and period-end;
•   The high, mean and low stressed VaR values over the reporting period and period-end;
•   The high, mean and low incremental and comprehensive risk capital charges over the reporting period and period-end; and
•   A comparison of VaR estimates with actual gains/losses experienced by the bank, with analysis of important "outliers" in back-test results;
(h) A presentation of the overall daily profits or exposures for aggregate market risk over the reporting period. At an absolute minimum, summarised aggregate quantitative information relating to monthly VaR results should be presented, giving an overview of the extent of market risk-related activities;
(i) Information showing the actual performance of the VaR models for the period, giving the number of times actual losses exceeded VaR estimates; and
(j) Summarised quantitative information for significant concentrations of foreign exchange exposure by currency, broken down by hedged and unhedged exposures.
Amended: July 2015
Amended: January 2012
Amended: April 2011
Amended October 2010
April 2008