EU eyes fix to FRTB’s capital asymmetry for govvies

Banks say French presidency proposal would see PD floor slashed for sovereign bonds under IMA

EU France FRTB montage

EU lawmakers are weighing a tweak to incoming market risk capital rules that will make it less punitive for banks using internal models to hold highly rated sovereign bonds. The move could incentivise banks to avoid shifting large chunks of fixed income trading to the standardised approach.

According to four people familiar with the matter, a proposal by French government representatives to the European Council would see the minimum floor under the internal models approach (IMA) for

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