Fundamental Review of the Trading Book (FRTB)

A fresh look at FRTB implementation

The Basel Committee’s FRTB guidance touches many areas of internationally active banks. Implementation of the guidance requires not only an understanding of the immediate impacts, but also insight into potential long-range challenges, including capital impact, optimization, and business strategy, P&L attribution and non-modellable risk factors (NMRFs), IT implementation, and target operating models. To address these challenges, banks have looked to Deloitte’s FRTB front-to-back advisory services over the past four years for a refreshing approach to FRTB implementation. Our approach includes, but is not restricted to:

• Front-office advisory: An in-depth capital impact assessment focused on generating strategic insights and understanding. Leveraging Deloitte’s proprietary attribution methodology, we can help transform quantitative impact study (QIS) data into usable information, review and prioritize the build, and provide strategic input into effective desk structure, capital mitigation and hedging strategies, and benchmarking assumptions against peers. We can also assist with trading book boundary implementation, booking models for internal risk transfers, and design of control and monitoring frameworks.
• Methodology support and design solutioning: Highly experienced and specialized support for risk methodology and front-office quant functions, prototyping models, and tactical solutions. We can provide regulatory interpretation, peer benchmarking and front-to-back IT infrastructure solutioning, as well as advising on the building out of NRMF frameworks and assisting with profit-and-loss attribution (PLA) remediation.
• Program support and defining the target operating model: Review of existing target operating model, FRTB process benchmarking and review of business requirements against the bank’s strategic objectives. We can develop recommendations for an end-to-end target operating model that is FRTB compliant and focused on alleviating pain points for the business, including project management structuring and support, strategic planning, and gap assessments.