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
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
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