- Fundamental Review of the Trading Book (FRTB)
Fundamental Review of the Trading Book (FRTB)
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Our take on FRTB in 60 seconds
Fundamental Review of the Trading Book (FRTB) addresses the shortcomings of the current (Basel 2.5) market risk framework, with the objective of making the financial system more robust whilst not unduly inhibiting the efficiency of the market.
The regulation introduces a wide range of changes, including:
- creation of a basic standard, which all banks need to adopt
- more stringent requirements to get approval to use internal models
- and an improved risk governance framework.
With the rules finalized in January 2019, there is no better time for a bank to progress implementation of new systems and processes for this regulation. Although these new rules don’t come into effect until Jan 2022, the complex nature of these new rules means banks have much work to do, so need to commence their implementation imminently.
This is particularly true for any bank seeking to gain or retain internal model status due to the complex nature of both the P&L attribution requirements and introduction of the Risk Factor Eligibility Test (RFET).
FRTB RFET challenges
What are the challenges of FRTB RFET?
Jacob Rank-Broadley (Director of Regulatory and Market Structure Propositions) and Fausto Marseglia (Head of Product Management, FRTB, Regulatory Propositions) - both at Refinitiv - discuss the biggest challenges that financial firms are facing with regards to implementing the Risk Factor Eligibility Test (RFET), part of the Fundamental Review of the Trading Book.
Passing the FRTB RFET
The bucketing approach
"One observation per month" requirement
Delayed publication of MiFID II data
Implementing FRTB RFET
Here are the essentials
With the FRTB rules finalized in Jan 2019 there is no better time to accelerate your implementation program. This is particularly true for those banks seeking IMA, as there is much work to do prior to the Jan 2022 deadline.
The demands of FRTB are considerable. Working with the right partner is essential, not only for compliance but to build a solid foundation from which to build your business.
We are your trusted partner, providing you with the knowledge, data and tools to put you in control of the outcome.
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