Minimum Capital Requirements for Market Risk

The prescribed risk weights and correlations in [7.41] to [7.89] have been calibrated to the liquidity adjusted time horizon related to each risk class. Delta GIRR buckets, risk weights and correlations 7.41 Each currency is a separate delta GIRR bucket, so all risk factors in risk-free yield curves for the same currency in which interest rate-sensitive instruments are denominated are grouped into the same bucket. 7.42 For calculating weighted sensitivities, the risk weights for each tenor in risk-free yield curves are set in Table 1 as follows: Delta GIRR buckets and risk weights Table 1 Tenor 0.25 year 0.5 year 1 year 2 year 3 year Risk weight 1.7% 1.7% 1.6% 1.3% 1.2% Tenor 5 year 10 year 15 year 20 year 30 year Risk weight (percentage points) 1.1% 1.1% 1.1% 1.1% 1.1% 7.43 The risk weight for the inflation risk factor and the cross-currency basis risk factors, respectively, is set at 1.6%. 7.44 For specified currencies by the Basel Committee, 22 the above risk weights may, at the discretion of the bank, be divided by the square root of 2. 7.45 For aggregating GIRR risk positions within a bucket, the correlation parameter ρ kl between weighted sensitivities WS k and WS l within the same bucket (ie same currency), same assigned tenor, but different curves is set at 99.90%. In aggregating delta risk positions for cross-currency basis risk for onshore and offshore curves, which must be considered two different curves as set out in [7.8] , a bank may choose to aggregate all cross-currency basis risk for a currency (ie “Curr/USD” or “Curr/EUR”) for both onshore and offshore curves by a simple sum of weighted sensitivities. 7.46 The delta risk correlation ρ kl between weighted sensitivities WS k and WS l within the same bucket with different tenor and same curve is set in the following Table 2: 23 Delta GIRR correlations (ρkl) within the same bucket, with different tenor and same curve Table 2 0.25 year 0.5 year 1 year 2 year 3 year 5 year 10 year 15 year 20 year 30 year 0.25 year 100.0% 97.0% 91.4% 81.1% 71.9% 56.6% 40.0% 40.0% 40.0% 40.0% 0.5 year 97.0% 100.0% 97.0% 91.4% 86.1% 76.3% 56.6% 41.9% 40.0% 40.0% 1 year 91.4% 97.0% 100.0% 97.0% 94.2% 88.7% 76.3% 65.7% 56.6% 41.9% 2 year 81.1% 91.4% 97.0% 100.0% 98.5% 95.6% 88.7% 82.3% 76.3% 65.7% 3 year 71.9% 86.1% 94.2% 98.5% 100.0% 98.0% 93.2% 88.7% 84.4% 76.3% 5 year 56.6% 76.3% 88.7% 95.6% 98.0% 100.0% 97.0% 94.2% 91.4% 86.1% 10 year 40.0% 56.6% 76.3% 88.7% 93.2% 97.0% 100.0% 98.5% 97.0% 94.2% 15 year 40.0% 41.9% 65.7% 82.3% 88.7% 94.2% 98.5% 100.0% 99.0% 97.0% 20 year 40.0% 40.0% 56.6% 76.3% 84.4% 91.4% 97.0% 99.0% 100.0% 98.5% 30 year 40.0% 40.0% 41.9% 65.7% 76.3% 86.1% 94.2% 97.0% 98.5% 100.0% 7.47 Between two weighted sensitivities WS k and WS l within the same bucket with different tenor and different curves, the correlation ρ kl is equal to the correlation parameter specified in [7.46] multiplied by 99.90%. 24 7.48 The delta risk correlation ρ kl between a weighted sensitivity WS k to the inflation curve and a weighted sensitivity WS l to a given tenor of the relevant yield curve is 40%. 7.49 The delta risk correlation ρ kl between a weighted sensitivity WS k to a cross-currency basis curve and a weighted sensitivity WS l to each of the following curves is 0%: (1) a given tenor of the relevant yield curve; (2) the inflation curve; or (3) another cross-currency basis curve (if relevant). 7.50 For aggregating GIRR risk positions across different buckets (ie different currencies), the parameter γ bc is set at 50%. Delta CSR non-securitisations buckets, risk weights and correlations