2.

Institutions shall have clearly defined policies and procedures for overall management of the trading book. At a minimum these policies and procedures shall address: the activities the institution considers to be trading and as constituting part of the trading book for capital requirement purposes; the extent to which a position can be marked‐to‐market daily by reference to an active, liquid two-way market; for positions that are marked‐to‐model, the extent to which the institution can: identify all material risks of the position; hedge all material risks of the position with instruments for which an active, liquid two‐way market exists; and derive reliable estimates for the key assumptions and parameters used in the model; the extent to which the institution can, and is required to, generate valuations for the position that can be validated externally in a consistent manner; the extent to which legal restrictions or other operational requirements would impede the institution's ability to effect a liquidation or hedge of the position in the short term; the extent to which the institution can, and is required to, actively risk manage the position within its trading operation; and the extent to which the institution may transfer risk or positions between the non‐trading and trading books and the criteria for such transfers.

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Source: EUR-Lex (Cellar) · retrieved 2026-10-10 · Text as adopted (Official Journal); later amendments are not incorporated in this text.