Trading book QIS: residual risk is 'killing everybody'
Residual risk add-on more broadly applicable than first thought under Basel review of trading book capital rules
An add-on for residual risk in the Basel Committee’s revised trading book capital rules is driving nearly half of a four-fold increase in regulatory capital, as seen in a recent quantitative impact study (QIS) conducted by banks.
The QIS, based on the committee’s Fundamental review of the trading book (FRTB), had been underway since July and was wrapped up last month.
Industry sources are shocked by the extent to which the add-on for residual risk has pushed up regulatory capital numbers for
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