FRTB – impact on business strategy

FRTB (or Minimal Capital Requirements for Market Risk, as BCBS would like us to know it now that it’s past the review stage, although I will keep using FRTB) has clearly non trivial impact on how a regulated organization will handle its Market Risk. But the F in...

New market risk regulations – FRTB-CVA

CVA is where most of the losses suffered by the banks in 2008-2009 happened, yet Basel 2 had no requirement to capitalise it.  A patch, Basel 2.5, came in pretty quickly on the heels of the crisis to cover this glaring hole, but as any hot-fix, it had problems of its...

New Market Risk Regulations – Trading Book

In the last post I looked at the new overall market risk regulation, and its split into Trading Book (TB) and CVA. In this note I will focus on FRTB-TB. The major changes that FRTB-TB brings can be summarized as: Much stronger and prescriptive separation of trading...

10 Greatest FRTB Challenges Facing Banks

The FRTB regulations will mean a huge change for banks and their capital regimes. Any great change to a regulatory regime comes with a lot of challenges and we wanted to look at the 10 greatest FRTB challenges facing financial institutions as a result. Strategy...

Risk Theoretical PnL under the FRTB

Risk Theoretical PnL One of the areas that is causing some concern and confusion is the idea of the Risk Theoretical PnL that is quite prominent in the FRTB regulatory paper from the BIS. The idea behind this is better alignment of risk models to front office pricing...