FRTB January 2017 FAQ Response and Review

Sanjay Sharma and John Beckwith

“The mere asking of a question causes it to disappear and merge into something else” – EM Forster

In January 2017, BCBS released an FAQ¹¹ BCBS d395. in response to some of the questions posed by industry. This was followed by a second FAQ, which was released in March 2018. Together, these FAQs clarify many of the concerns raised by industry practitioners after FRTB’s release, but left a number of key questions unresolved. In addition, the format of the FAQ response publication makes it difficult to refer back to the FRTB guidelines document. Therefore, we will first take an inventory of what the FAQ did not address, and then make suggestions for practitioners and regulators for how these open issues might be addressed. We then turn to a fulsome discussion of the FAQ itself.

DARK MATTER

Since the issuance of new rules in January 2016, the industry and sovereign regulators have been struggling with how to interpret and implement various parts of the rules. While the two FAQs help address some of these items, there are a number of issues that are either not addressed or not satisfactorily addressed.

Timing

• • Concern: It was unreasonable to expect that the