Adjusting to the P&L attribution test in FRTB

Consultants offer tips on eligibility framework for new internal models approach

Under the new framework of market risk capital rules, known as FRTB, banks will have to calculate capital using the revised standardised approach (SA). They can also apply for approval to use the internal models approach (IMA) at desk level, which generally results in a lower capital charge according to impact studies. To use the IMA, a desk needs to fulfil a set of strict qualitative and quantitative criteria, including clearing two hurdles: the backtesting requirement, which is similar to the