- Fundamental Review of the Trading Book (FRTB)
Fundamental Review of the Trading Book
Obtain the data you need for the Standardised and Internal Models Approaches, to perform FRTB analytics in-house or through a market risk engine.
What are the biggest FRTB implementation challenges?
Around the world, banks are finding the implementation of the Fundamental Review of the Trading (FRTB) requirements – with an international deadline of January 2023 – very challenging. Top issues include:
- Standardised Approach capital calculations demand three different metrics, and the Sensitivities Based Method is particularly complex. Banks need to apply the relevant risk class, risk weight, and risk bucket metrics to calculate their capital.
- Within the Standardised Approach, the Funds Look-Through Approach and the Index Look-Through Approach both require lots of detailed price and reference data about individual funds and index constituents.
- To pass the Risk Factor Eligibility Test (RFET), under the Internal Models Approach, banks must obtain “real price observations” (RPOs) for 12 months, attribute RPOs to individual risk factors, and check if there is enough activity to pass liquidity thresholds. This requires large amounts of data, sometimes from opaque markets.
For most banks, the biggest FRTB data gap is in over-the-counter (OTC) products. Legacy technology infrastructure, data governance issues, and other challenges can mean that working with a trusted data partner will reduce the time and resources needed to achieve FRTB compliance.
Refinitiv's overall response to the FRTB regulation
Our latest complimentary webinar explores the ambiguous aspects of the FRTB regulation, including remaining challenges for practitioners, disruptions like COVID and LIBOR, we also discuss solutions, in advance of the January 2023 deadline. We’ve invited a regulation authority representative and banking industry leaders to discuss how they are approaching the rules, timelines, and implementation.
Sensitivities Based Method Data – Refinitiv provides the data fields at the instrument level that banks need to calculate their capital requirements under the Sensitivities Based Method, including risk class, risk bucket, and risk weight. Refinitiv also delivers full transparency by providing the data fields necessary to calculate these three fields.
Funds Look-Through Approach Data – Banks can access an up-to-date list of individual constituents and weights for the relevant funds in their portfolios. This includes identification of UCITs and alternative funds.
Index Look-Through Approach Data: –Banks can access to individual constituents and weights for listed equity or credit indices.
Internal Models Approach
Banks can comply with the Risk Factor Eligibility Test by using regulatory compliant RPOs data for exchange traded instruments, across 400+ venues, as well as for OTC cross asset class derivatives products, in both transparent and opaque OTC markets.
Our Trade Discovery solution delivers the machine-readable Real Price Observations (RPOs) data needed to comply with the Risk Factor Eligibility Test.
Trade Discovery provides billions of processed RPOs across exchange-traded and over-the-counter derivative instruments covering rates, credit, FX and equities in multiple jurisdictions.
The instrument terms and conditions across 60+ attributes sit within a single data model, allowing easy mapping of RPOs to risk factors.
Deploy high-quality and transparent data that is compliant with FRTB regulatory obligations.
Use Refinitiv data in the bank’s in-house FRTB analytics, or within a third-party FRTB calculation engine.
Purchasing FRTB data from Refinitiv is often easier and less expensive than trying to harvest that data internally.
Engage with the expertise of Refinitiv Professional Services around the globe for FRTB data implementation projects
Refinitiv Support Teams are available 24/7/365 around the world, to help with firms with their FRTB data queries
Refinitiv helps firms acquire and manage the data needed to meet the demands of regulatory change.
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