# Commission Implementing Regulation (EU) 2016/2070 of 14 September 2016 laying down implementing technical standards for templates, definitions and IT-solutions to be used by institutions when reporting to the European Banking Authority and to competent authorities in accordance with Article 78(2) of Directive 2013/36/EU of the European Parliament and of the Council (Text with EEA relevance), Division 1: Common Instructions

Extent: E+W+S+N.I.

Institutions shall apply all of the following:
(a) Unless explicitly specified otherwise in the portfolio description, all positions shall be booked on 19 September 2018 . Once positions have been booked, each portfolio shall age for the duration of the benchmarking exercise. Furthermore, calculation shall be done under the assumptions that the institution does not take action to manage the portfolio in any way during the entire period of the exercise. Unless explicitly stated otherwise in the specifications for a particular portfolio, strike prices for options positions shall be determined relative to prices for the underlying, as observed at market close on Wednesday 19 September 2018 .
(b) For the purposes of pre-benchmarking exercise validation, the valuation of each instrument shall be submitted to the institution's competent authority by Friday 5 October 2018 . By that day, the explanatory documents, accompanying the results, requested hereinafter, shall be delivered as well. Initial Market Valuation (IMV) means the determination of the value marked to market at the valuation day and time. The exact timing of the valuation shall be Wednesday 26 September 2018 , 17:30 CET (4.30 pm GMT).
(c) The risks of the positions shall be calculated without taking into account the funding costs. Where applicable, institutions shall use the overnight rate of the instrument currency as the discount rate.
(d) To the extent possible, counterparty credit risk and credit valuation adjustment ( ‘ CVA ’ ) risk shall be excluded when valuing the risks of the portfolios.
(e) The 10-day 99 % Value at Risk ( ‘ VaR ’ ) shall be calculated on a daily basis. Stressed VaR ( ‘ sVaR ’ ) and the incremental risk charge ( ‘ IRC ’ ) may be calculated on a weekly basis. sVaR and IRC must be based on end-of-day prices for each Friday in the time window of the benchmarking exercise;
(f) For each portfolio, provide results in the base currency of the instrument and of the portfolio (see below);
(g) For transactions that include long positions in credit default swaps (CDS), institutions shall assume payment of an immediate up-front fee to enter the position as per the market standards and conventions. Treat the maturity date for all CDS as following conventional quarterly termination dates;
(h) Where additional specifications are needed in order to carry out pricing calculations required for CDS positions, produce these in line with commonly used market standards and conventions;
(i) Use the maturity date that ensures that the transaction is closest to the term-to-maturity specified, in line with market standards and conventions;
(j) For material details of the instrument specification that are not explicitly stated in the document, provide the competent authority with a separate explanatory document accompanying the results and setting out the assumptions that you have used (e.g. day count convention and the choice of a tradable and liquid instrument, where permitted);
(k) Where a bank is required to make assumptions beyond those specified here that it believes are relevant to the interpretation of its exercise results (e.g. close of business timing, coupon rolls, mapping against indices, etc.), it shall provide the competent authority with a description of them in a separate explanatory document accompanying the results;
(l) The terms ‘ at the money ’ (ATM), ‘ out of the money ’ (OTM) and ‘ in the money ’ (ITM) refer to the relative position of the current or future price of a derivative's underlying asset with respect to its strike price ( ‘ moneyness ’ );
(m) Treat all options as if they are traded over the counter (OTC), unless explicitly specified otherwise;
(n) Follow the standard timing conventions for OTC options (i.e. expiry dates are the business day following a non-trading day). The time to maturity for an ‘ n-month ’ option is n months. If options expire on a non-trading day, adjust the expiry date per business date, in accordance with market standards and conventions;
(o) Treat all OTC options as follows:
as American for single name equities and commodities; and
as European for equity indices, foreign exchange and swaptions;
(p) Consider all OTC options as ‘ naked ’ , i.e. exclude the premium from the initial market valuation;
(q) As regards the correlation trading portfolio (CTP), APR stands for ‘ all-price risk ’ in accordance with Article 377 of Regulation (EU) No 575/2013 (CRR). Institutions that are permitted to use the APR model for CTP must subsequently provide details of their most relevant assumptions and market standards and conventions as regards CTP instruments nos. 56 and 57, including the hedge ratios they have calculated to make the CTP instruments CS01 neutral at inception (i.e. the booking date). They must deliver this explanatory note to the competent authority by Friday 5 October 2018 ;
(r) For the positions denominated in a common base currency, but composed by one or more instruments denominated in a different currency, convert the result provided into the reported base currency using the appropriate foreign exchange spot rate as for standard market practice, and explain this in the accompanying document;
(s) When booking all positions, follow appropriate market conventions where not specified otherwise. Hereinafter, ‘ long ’ means buy and ‘ short ’ means sell. For CDS, ‘ long ’ means buy protection and ‘ short ’ means sell protection;
(t) Where an instrument or the underlying instrument for a derivative is subject to a corporate action that affects this benchmarking exercise (e.g. a call from the issuer or a default or similar action), exclude it from the portfolio together with any related CDS or option;
(u) ‘ On-the-run ’ , referring to an index series, means the most liquid and tradable series of that specific index available on the market. Report this choice along with the related results in the appropriate text cell in the template and in the accompanying explanatory document;
(v) The euro interbank offered rate (EURIBOR) is the rate calculated by the European Money Markets Institute at different maturities for euro interbank term deposit. The London interbank offered rate (LIBOR) is the rate calculated by the Intercontinental Exchange at different maturities for interbank term deposit in different currencies;
(w) Compute risk measures for the portfolios, along with the present value, from 21 January to 1 February 2019 and submit the results to your competent authority by 28 February 2019 ;
(x) Provide IMV for each instrument, and risk measures (and present value where applicable) for each portfolio, both individual and aggregated. Report all results in the base currency;
(y) Credit-spread portfolios must be considered only by institutions that have been granted permission to model specific risk. Interest-rate portfolios, even if specific risk is part of certain instruments and individual portfolios, must also be modelled by ‘ partial use ’ institutions;
(z) Submit the results for the aggregated portfolios only if you have submitted the results of all components.

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Source: https://www.legislation.gov.uk/eur/2016/2070/annex/V/division/1 (the official version)
Page: https://openlegislation.uk/eu-regulation-2016-2070/annex-V/division-1
Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.