Fundamental Review of the Trading Book (FRTB)

A fresh look at the Nordic FRTB implementation effort.

We recently conducted a Nordic survey on the Fundamental Review of the Trading Book (FRTB). The purpose of the survey was to provide participants with insight into the overall industry progress and the pain points experienced by others during the implementation process, leading up to the final implementation date.

Insights from the survey

The survey addressed all major areas of FRTB including amongst others modelling approaches, Profit and Loss Attribution (PLA), Non Modellable Risk Factors (NMRF), capital impact, model performance, and Banking Book & Trading Book (BB/TB) boundary.

Some of the insights from the survey are summarised below:

  • Participants included mainly Tier 1 banks from Denmark, Finland, Norway and Sweden.
  • The responses in some of the sections of the survey indicate a lack of progress within some areas e.g. overall capital impact, details of the Internal Model Approach (IMA), and the Credit Valuation Adjustment (CVA) capital charge.
  • Most participants focused their efforts on their Standardised Approach (SA) implementations up to the end of 2018, while planning to pursue IMA and other strategic areas of FRTB from 2019 onwards.
  • The most common challenge that participants face relates to delays and uncertainty from Regulators and Supervisory Authorities, followed by infrastructure upgrades.
  • At this stage, there is still a high degree of uncertainty around the overall capital impact of the FRTB, although it is expected to be significant.

Feel free to reach out to us should you want to discuss this and other related FRTB areas in more detail.

Nordic Survey on Fundamental Review of the Trading Book
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