FRTB – Special report 2020

Throughout FRTB’s troubled gestation, regulators were warned that making the internal models approach too operationally complex and capital-intensive would mean few outside the biggest banks wanted to use it – with the potentially dire consequence that all mid-sized and even some larger banks would wind up focussing liquidity provision solely on liquid benchmarks – leaving them all exposed to the same risks and underlyings when asset prices collapse.

Many warned at the time that such flaws were a consequence of an aggressive timetable when writing the rules, and would lead to suboptimal outcomes – and so it proved. FRTB’s initial timetable proved unworkably optimistic; it was hived off from the rest of Basel III; then cracked open and rewritten under a new Market Risk Group led by the Bank of England’s Derek Nesbitt, under whom banks report having earned a fairer hearing for their concerns.

Already, the start of the new regime had been pushed back to 2022; with final implementation now delayed to 2023 along with the rest of Basel III as a consequence of Covid, gauging the final impact remains a way off – and even then, its true cost will not become clear till it gets a thorough road-test in the next market meltdown.


Download the full 2020 FRTB special report in PDF format

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FRTB implementation – Covid-19 and Libor pressure

Industry leaders discuss the pressures FRTB is placing on banks’ data infrastructure and systems, how FRTB may constrain banks’ ability to manage future volatility, and the potential complications to implementation caused by such factors as the Covid‑19…

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