The Fundamental Review of the Trading Book
It’s time to start looking into the strategic and business implications of this wide-ranging and fundamental review of the new capital requirements.
With the final set of definitions soon to be released by the Basel Committee on Banking Supervision (BCBS), financial institutions are now keenly anticipating getting final certainty on the proposed regulation. After a lot of debate, substantial progress has been made in defining the new market risk regulatory capital framework and its likely business implications.
The current proposal significantly changes the treatment of market risk for all regulated entities:
- for the replacement of Value at Risk (VaR) with liquidity-adjusted expected shortfall,
- more stringent requirements for risk measures with front office P&L data,
- the update of the Standardised Approach (SA) to align more closely with the Internal Model Approach (IMA),
- the revision of the rules for determining a clear split of instruments between the trading and the banking books, and
- the computation of the CVA capital charge as a specific categories within market risk.
Misys is here to help you making sense of the regulations.
In addition to requiring significantly greater computing capacity, the treatment of illiquid instruments will result in a significant increase in required capital.
Read our regulatory update on FRTBDownload Regulatory Update >
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