The fundamental review of the trading book (FRTB) goes live in
2019. Its impact stretches far beyond changes to model methodology.
National supervisors are expected to finalize implementation of the
revised market risk standard by January 2019 and to require their
banks to report under the new standards by 2020.
FRTB program implications
While it is reasonably clear what is required for IT, data, and
implementation, there are still some unknowns and some tough to
deliver requirements, including Non-Modellable Risk Factors
(NMRFs), Profit and Loss (P&L) attribution, and the question of
whether full revaluation is needed to satisfy the attribution
tests.
Although banks have participated in regulatory Quantitative
Impact Studies (QIS) and industry surveys, not all banks have
performed detailed analysis to determine impact on trading desks
and business strategy. By doing so, there is an opportunity to
shape the design and implementation of FRTB in a more optimal
way.
