§ 217.206 - Stressed VaR-based measure.

§ 217.206 Stressed VaR-based measure.

(a) General requirement. At least weekly, a Board-regulated institution must use the same internal model(s) used to calculate its VaR-based measure to calculate a stressed VaR-based measure.

(b) Quantitative requirements for stressed VaR-based measure.

(1) A Board-regulated institution must calculate a stressed VaR-based measure for its covered positions using the same model(s) used to calculate the VaR-based measure, subject to the same confidence level and holding period applicable to the VaR-based measure under § 217.205, but with model inputs calibrated to historical data from a continuous 12-month period that reflects a period of significant financial stress appropriate to the Board-regulated institution's current portfolio.

(2) The stressed VaR-based measure must be calculated at least weekly and be no less than the Board-regulated institution's VaR-based measure.

(3) A Board-regulated institution must have policies and procedures that describe how it determines the period of significant financial stress used to calculate the Board-regulated institution's stressed VaR-based measure under this section and must be able to provide empirical support for the period used. The Board-regulated institution must obtain the prior approval of the Board for, and notify the Board if the Board-regulated institution makes any material changes to, these policies and procedures. The policies and procedures must address:

(i) How the Board-regulated institution links the period of significant financial stress used to calculate the stressed VaR-based measure to the composition and directional bias of its current portfolio; and

(ii) The Board-regulated institution's process for selecting, reviewing, and updating the period of significant financial stress used to calculate the stressed VaR-based measure and for monitoring the appropriateness of the period to the Board-regulated institution's current portfolio.

(4) Nothing in this section prevents the Board from requiring a Board-regulated institution to use a different period of significant financial stress in the calculation of the stressed VaR-based measure.