FRTB: Basel guidance on backtesting frustrates dealers
Dealers blast “illogical” carve-outs for backtesting exceptions
Dealers have been left frustrated by the Basel Committee’s response to questions on model backtesting under the revised market risk framework. One dealer complains the provisions – which seek to clarify the circumstances in which trading desks can ignore backtesting breaches that are attributable to illiquid risk factors – “make no sense”, while others interpret them as likely to load unjustified capital charges on to banks.
The committee’s FAQ document, published on January 26, addressing
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