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Financial and capital market Commission Regulation No. 126, Riga 2005 October 28 (financial and capital market Commission Council meeting Protocol No. 41, 2. p.)
The amendments "capital adequacy calculation rules ' issued in accordance with the financial and capital market Commission Act 7 of the first paragraph of article 1 and paragraph 2, and article 17, paragraph 2 of article 50 of the law of credit institutions, financial instruments market law article 121 the first and the seventh paragraph and investment management company law article 8 the ninth part 1. Done with the financial and capital market Commission of the Council of 17 November 2004, decision No. 255 (pr. Nr. 44, 2. p.) approved "capital adequacy calculation rules" the following amendments: 1. Add a new paragraph following 18.104.22.168: "22.214.171.124. market risk capital requirements using internal models (in accordance with the provisions of paragraph 11), where they are used.".
1.2. Make 3.9 the following wording: "3.9. Company may submit a request to the Commission to exempt it from the obligation to calculate and observe the position of the trade, settlement and counterparty risk capital requirements in accordance with 6-9 and/or requirements of paragraph 11, if the following criteria are fulfilled simultaneously:".
1.3. To add a new paragraph 11, accordingly, changing the numbering of subsequent paragraphs: "11 value INTERNAL RISK models 11.1. Foreign exchange risk, for position risk, as well as the commodities risk capital requirement for determining the public can use the risk value (called a RPVS) internal models. RPVS internal models can be applied to some of these risks, in part or in full. Market risks (risk part) not subject to internal models RPVS market risk capital requirements calculated in accordance with other methods referred to in these provisions with respect to market risk capital requirements.
11.2. The public can use the RPVS internal models for market risk capital requirements for the calculation of the authorisation by the Commission, only if the company's risk management system and internal models RPVS used comply with 11.3. – in paragraph 11.18.
11.3. the company's risk management system must meet the following minimum requirements: 11.3.1. RPVS internal model is closely related to the daily risk management process in society and serves as a basis for the review of the impact of risk about the preparation of the company's management;
11.3.2. the company has established an independent risk control unit that is subject to direct management of the company. This Department is responsible for the company's risk management system development and implementation, draw up and analyse daily reports, obtained using RPVS internal model results, and proposes appropriate measures if internal limitations are exceeded;
11.3.3. the company is involved in the management of risk control process and risk control Department prepare daily reports look like managers who have a sufficient mandate to reduce both individual dealers and company heading the total transaction amount subject to risks;
11.3.4. the company has sufficient numbers of staff with experience working with complex models not only trading operations with financial instruments, but also risk control, audit and transaction records;
11.3.5. the company has developed procedures for market risk management and compliance with the documented internal policies and procedures to ensure that all the requirements concerning the risk measurement system for the control of compliance with the functioning;
11.3.6. RPVS internal models are documented and represents acceptable risk accuracy of measurement;
11.3.7. the company regularly performs stress testing (stress testing). Stress test scenarios simulate events that have a small probability, but which can cause extraordinary loss trading portfolio, including positions with linear and non-linear changes in prices. The results of the management of the public appearance, and are reflected in public policies and in the ceiling;
11.3.8. regular internal audits are carried out under independent risk measurement systems. The control shall cover both unit which shall make the marketing portfolio, financial instruments in activity, both the independent risk control units;
11.3.9. at least once a year the company makes all its market risk management process that includes the following checks: 126.96.36.199. risk management system and process documentation adequacy and risk control Department, 188.8.131.52., the use of internal models RPVS daily risk management and the management information system integrity, 184.108.40.206. izcenošan of the risk (risk-pricing) models and risk assessment system used for trading (front office) and accounting (back office) staff , the approval process, 220.127.116.11. which market risks and the extent to which covers internal models, 18.104.22.168 RPVS. any significant changes in the risk-measurement process approval, 22.214.171.124. position data accuracy and correlation and succeeds, the castle of the variability hypothesis accuracy and consistency, valuation and risk sensitivity calculations for accuracy, 126.96.36.199. the verification process, which the company uses to verify the RPVS internal models used data source the consistency, timeliness and reliability, including the data source the test for independence 188.8.131.52. the verification process, which the company uses RPVS internal models for the purpose of assessing the accuracy of the retroactive tests carried out (back testing) results.
11.4. Market risk capital requirements for the RPVS for calculation of the internal model shall meet the following minimum quality requirements: 11.4.1. RPVS internal model to accurately include all significant public option or option-like positions in pricing risk. Any other risks that are not covered by the internal model RPVS are appropriately covered by own funds. With the options associated risk measurement process take into account the non-linear changes in the prices of options positions, as well as the risk measurement system shall cover the option's position in the price fluctuation risks, or the risk of Vega;
11.4.2. depending on the degree of public activity in the relevant markets RPVS internal model comprises a sufficient number of risk factors:
184.108.40.206. to determine the interest rate risk, the risk-measurement system shall include risk factors corresponding to the interest rates in each currency in which the company has interest rate sensitive balance sheet or off-balance-sheet items. Yield curve model by using one of the methods generally recognised. Significant interest-rate sensitive positions distributed according to the major currencies and markets. According to the distribution of the yield curve at least six time intervals to capture the variability of the interest rate fluctuations. Risk measurement system also includes a complete correlation between the different curve risk, to determine the 220.127.116.11. foreign exchange risk, risk measurement system includes risk factors corresponding to gold and to the individual foreign currencies in which the company positions denominated 18.104.22.168. to determine the equity risk, the risk measurement system includes a separate risk factor at least for each of the equity markets in which the company has significant positions, 22.214.171.124. to determine the size of the risk risk measurement system shall include a separate risk factor at least for each commodity in which the public has an important position. Measuring system for risk also includes the risk associated with imperfect correlation between similar but not identical to the goods, and changes in the future prices, due to lack of time. Also take account of market characteristics, delivery dates and business partners the opportunity to close positions;
11.4.3. correlation detection system is adequate and implemented in such a way that the public can use empirical correlations within risk factors and risk factors among.
11.5. RPVS calculation must meet the following minimum quantitative requirements: 11.5.1. RPVS calculation is made at least once each working day;
126.96.36.199. is applied to the unilateral percentil (one-tailed) confidence interval;
11.5.3. position the holding period is equivalent to 10 working days;
11.5.4. There is at least one year historical observation period, except where a shorter observation period is justified by a significant price fluctuations;
11.5.5. the whole data set is updated not less frequently than quarterly.
11.6. the company assess its RPVS internal model accuracy and performance when retrospectively checks (back testing). Retrospective verification shall be carried out, taking into account both actual and hypothetical changes in the portfolio's value.
7.3. Actual retroactive inspection provides that every working day is made in one day by the public using RPVS RPVS are calculated by the internal model portfolio work end-of-day positions, compared with the work days of the portfolio of the actual changes to the end of the day.
11.8. The hypothetical changes in the portfolio's value in retroactive testing based on the actual value of the portfolio at the end of the day the job comparison with the value of the following working day at the end, assuming that the position does not change. Calculate the change in value of the portfolio compared with the company's use of the internal model calculated RPVS portfolio RPVS next working day.
7.4. the company calculates the number of excess on a regular basis, based either on actual or on hypothetical changes in the portfolio's value, the retroactive testing. Overshoot (overshooting) is a one-day change in the portfolio's value that exceeds the internal model RPVS assistance calculated according to daily RPVS.
11.10. The company may use internal model trading RPVS portfolio of debt securities and equity securities of specific risk capital requirement calculation, if in addition to 188.8.131.52. the requirements of point-RPVS internal model: off. explain portfolio financial instrument price historical changes;
11.10.2. take into account the company's financial instruments owned by the degree of concentration and changes in the structure of the portfolio;
11.10.3. produce reliable results despite adverse circumstances and factors;
11.10.4. accurately reflect the specific risk, as evidenced by the retroactive checks. If the test is carried out on a apakšportfeļ retrospective (sub-portfolio) base, then this apakšportfeļ choice must be consistent.
11.11. If public RPVS used internal models do not satisfy paragraph 11.10 these requirements, the company calculates the specific risk capital requirement in accordance with the requirements of point 6.
11.12. Market risk capital requirements calculated using RPVS internal models, is the largest of the following indicators: 11.12.1. the previous working day for the RPVS, calculated in the light of paragraph 11.3, 11.10;
11.12.2. the previous 60 business days average RPVS, multiplied by a coefficient equal to at least 3. rule 11.13 11.12.2. the coefficient referred to in paragraph 1 shall be increased by 0 and 1 in accordance with table 11.1 depending on retrospective examination found the number of exceedances in recent 250 business days. Factor review not less frequently than once a month, and a specific factor is in effect until the next review.
11.1. table. The increase of the coefficient of determination of exceedances number depending on the number of Exceedances of the magnification
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