The test checks whether there are enough observations of "real prices" that can be linked to the risk factor, such as the bank's own transaction prices, prices of actual transactions between third parties, and prices that refer to committed quotes. The notice's criterion is at least 24 observations in the last 12 months with at least 4 in every 90-day period, or at least 100 observations1. The 2019 revision clarified the definition of a real price and that prices used to reconcile collateral are not real prices2.

A bank using the internal models approach runs this test every quarter3. For risk factors judged non-modellable, capital is calculated with stress scenarios instead of expected shortfall4.

Notes

  1. "銀行法第十四条の二の規定に基づき、銀行がその保有する資産等に照らし自己資本の充実の状況が適当であるかどうかを判断するための基準" (Standards for determining whether a bank's capital adequacy is appropriate in light of the assets it holds, under Article 14-2 of the Banking Act, our translation; Financial Services Agency Notice No. 19 of 2006, full text updated by the FSA on August 24, 2026) (in Japanese), Article 274-2, paragraphs 2 and 3, pages 450–451. ↩

  2. Financial Services Agency and Bank of Japan, "「マーケット・リスクの最低所要自己資本」の概要" (Overview of "Minimum capital requirements for market risk", our translation) (January 2019), pages 19–20, "IMA：2016 年の規則文書から最終化にかけての変更点（2）NMRF" (IMA: changes from the 2016 rules text to the finalization (2) NMRF) (in Japanese). ↩

  3. The same notice, Article 274-5, paragraph 1, page 456. ↩

  4. The same notice, Article 276-5, paragraph 1, page 472. ↩