The FRTB: Concepts, Implications and Implementation
First published:
ISBN: 978-1-78272-324-0
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Regulatory Responsibilities and Supervisory Framework
Overview and Impact
The Boundary Between Trading and Banking Books Under FRTB
Moving from Value-at-risk to Expected Shortfall
The Standardised Approach
The Internal Models Approach
Default Risk Charge: Standardised and Internal Models Approaches
P&L Attribution and Backtesting
Regulating and Managing Non-modellable Risk Factors
Impact of a Capital Floor
Managing Regulatory Trading Desk Frameworks
Implementation of FRTB Framework
Model Frameworks and Management
Regulatory Responsibilities and Supervisory Framework
FRTB January 2017 FAQ Response and Review
“Market discipline should be the first line of defense, not regulators like me coming along and beating people over the head” – Andrew Bailey, Chief Executive Officer of the Financial Conduct Authority, Bank of England11 Andrew Bailey’s remarks to BBC Radio Scotland in January 2011, as reported in the Financial Times in 2016 (see https://www.ft.com/content/9bdeda24-c417–11e5–808f-8231cd71622e).
From a regulatory perspective, FRTB represents a new paradigm for operating, managing and monitoring the global framework for trading businesses. It is clearly more than an improved set of calculation protocols overlaid on new quantitative methodologies. It envisions that market risk supervision will become significantly more rigorous, contemporaneous and granular. Jurisdictional interpretations and rules could have a profound effect on the structure and competitive positioning of national banking systems and markets. However, what will not change is the fundamental objective of depository regulation: to ensure the financial stability of both individual institutions as well as that of entire financial systems.
In response to FRTB’s “final” release in January 2016, regulatory and
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