Dealers seek FRTB carve-out for Libor transition

Swaps could be judged non-modellable – and hit with capital add-on – as liquidity tails off in Libor

FRTB safe harbour will be granted for Libor replacement project, banks hope

Banks are planning to ask regulators for capital relief during attempts to move roughly $370 trillion in swaps notional away from Libor to new interest rate benchmarks.

Under incoming market risk capital rules – the Fundamental Review of the Trading Book – banks that model their own requirements will face a capital add-on for all risk factors not backed by a minimum level of trading. Studies have estimated these less-liquid portions of the portfolio could account for 30% of the total capital