Implementation of FRTB Framework

Sanjay Sharma and John Beckwith

“The journey of a thousand miles begins with one step” – Lao Tzu

Even the subtlest changes in market structure and regulatory requirements impact the day-to-day functions of front office (sales and trading), and finance, operations, risk and treasury (FORT). A regulation as sweeping as FRTB warrants a bottom-up evaluation of the capabilities of the current infrastructure and processes with a view to optimisation and alignment with other requirements – liquidity coverage ratio (LCR), net stable funding ratio (NSFR), stress testing, etc.

Banks that plan to have Regulatory Trading Desks (RTDs) approved for IMA capital treatment must have their implementation for these RTDs completed, tested and approved at least one year prior to implementation¹¹ The required implementation date of December 31, 2019 as originally prescribed by the BCBS is being adjusted by jurisdiction. Revisions to the Basel III time lines issued December 2017 (BCBS d424) prescribe that jurisdictions must establish on implementation deadline no later than January 1, 2022. Although BCBS d424 also establishes a regulatory implementation date of January 1, 2022, as a pragmatic matter, IMA implementation will need