As part of our series on CRR II and DPM 3.0 we wanted to discuss the impacts of the FRTB and Market Risk.
Since the global financial crisis, the Basel Committee on Banking Supervision has been working on the Fundamental Review of the Trading Book. The FRTB brings many significant changes, not least of which involve the distinction between the trading and banking books and new reporting requirements. Because the FRTB was incomplete when the EU drew up CRR 2, CRR 2 only introduces new reporting requirements on market risk. As of yet, there are no new changes to the capital requirements for market risk.
Our panel of experts discuss the challenges that financial institutions face with the new sensitivities-based approach in terms of auditability, managing complex calculations, data requirements and more.
• Jonathan Vincent-Viry, RegTech Engineering Lead - Suade Labs
• Selwyn Blair-Ford, Regulatory Specialist, Partner - HKB Risk Consulting
• Hadrien van der Vaeren, Senior Manager, Risk - Avantage Reply
• Sensitivities based approach (replacing the old standardised approach)
• Auditability of calculations and regulatory reports
• Connection between the FRTB and trading decisions
• Technology can provide continuous integration using the cloud to submit reports
• Technology makes the calculations whilst providing single interpretation of the rules, reduces ambiguity
• As complexities of the project increase, firms need to use technology to deliver faster results.
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