(a) Scope. A Board-regulated institution must comply with this section
unless it is a consolidated subsidiary of a bank holding company or
a depository institution that is subject to these requirements or
of a non-U.S. banking organization that is subject to comparable public
disclosure requirements in its home jurisdiction. A Board-regulated
institution must make timely public disclosures each calendar quarter.
If a significant change occurs, such that the most recent reporting
amounts are no longer reflective of the Board-regulated institution’s
capital adequacy and risk profile, then a brief discussion of this
change and its likely impact must be provided as soon as practicable
thereafter. Qualitative disclosures that typically do not change each
quarter may be disclosed annually, provided any significant changes
are disclosed in the interim. If a Board-regulated institution believes
that disclosure of specific commercial or financial information would
prejudice seriously its position by making public certain information
that is either proprietary or confidential in nature, the Board-regulated
institution is not required to disclose these specific items, but
must disclose more general information about the subject matter of
the requirement, together with the fact that, and the reason why,
the specific items of information have not been disclosed. The Board-regulated
institution’s management may provide all of the disclosures required
by this section in one place on the Board-regulated institution’s
public website or may provide the disclosures in more than one public
financial report or other regulatory reports, provided that the Board-regulated
institution publicly provides a summary table specifically indicating
the location(s) of all such disclosures.
(b) Disclosure policy. The Board-regulated
institution must have a formal disclosure policy approved by the board
of directors that addresses the Board-regulated institution’s approach
for determining its market risk disclosures. The policy must address
the associated internal controls and disclosure controls and procedures.
The board of directors and senior management must ensure that appropriate
verification of the disclosures takes place and that effective internal
controls and disclosure controls and procedures are maintained. One
or more senior officers of the Board-regulated institution must attest
that the disclosures meet the requirements of this subpart, and the
board of directors and senior management are responsible for establishing
and maintaining an effective internal control structure over financial
reporting, including the disclosures required by this section.
(c) Quantitative disclosures.
(1) For each material portfolio
of covered positions, the Board-regulated institution must provide
timely public disclosures of the following information at least quarterly:
(i) The high, low, and mean VaR-based measures over the reporting
period and the VaR-based measure at period-end;
(ii) The high, low, and mean stressed
VaR-based measures over the reporting period and the stressed VaR-based
measure at period-end;
(iii) The high, low, and mean incremental risk capital requirements
over the reporting period and the incremental risk capital requirement
at period-end;
(iv)
The high, low, and mean comprehensive risk capital requirements over
the reporting period and the comprehensive risk capital requirement
at period-end, with the period-end requirement broken down into appropriate
risk classifications (for example, default risk, migration risk, correlation
risk);
(v) Separate
measures for interest rate risk, credit spread risk, equity price
risk, foreign exchange risk, and commodity price risk used to calculate
the VaR-based measure; and
(vi) A comparison of VaR-based estimates
with actual gains or losses experienced by the Board-regulated institution,
with an analysis of important outliers.
(2) In addition, the Board-regulated institution
must disclose publicly the following information at least quarterly:
(i) The aggregate amount of on-balance sheet and off-balance sheet
securitization positions by exposure type; and
(ii) The aggregate amount of correlation
trading positions.
(d) Qualitative disclosures. For each material
portfolio of covered positions, the Board-regulated institution must
provide timely public disclosures of the following information at
least annually after the end of the fourth calendar quarter, or more
frequently in the event of material changes for each portfolio:
(1) The composition of material portfolios
of covered positions;
(2) The Board-regulated institution’s valuation policies, procedures,
and methodologies for covered positions including, for securitization
positions, the methods and key assumptions used for valuing such positions,
any significant changes since the last reporting period, and the impact
of such change;
(3)
The characteristics of the internal models used for purposes of this
subpart. For the incremental risk capital requirement and the comprehensive
risk capital requirement, this must include:
(i) The approach used
by the Board-regulated institution to determine liquidity horizons;
(ii) The methodologies
used to achieve a capital assessment that is consistent with the required
soundness standard; and
(iii) The specific approaches used in the validation of these models;
(4) A description
of the approaches used for validating and evaluating the accuracy
of internal models and modeling processes for purposes of this subpart;
(5) For each market risk
category (that is, interest rate risk, credit spread risk, equity
price risk, foreign exchange risk, and commodity price risk), a description
of the stress tests applied to the positions subject to the factor;
(6) The results of the
comparison of the Board-regulated institution’s internal estimates
for purposes of this subpart with actual outcomes during a sample
period not used in model development;
(7) The soundness standard on which the
Board-regulated institution’s internal capital adequacy assessment
under this subpart is based, including a description of the methodologies
used to achieve a capital adequacy assessment that is consistent with
the soundness standard;
(8) A description of the Board-regulated institution’s processes
for monitoring changes in the credit and market risk of securitization
positions, including how those processes differ for resecuritization
positions; and
(9) A
description of the Board-regulated institution’s policy governing
the use of credit risk mitigation to mitigate the risks of securitization
and resecuritization positions.
