Canada’s FRTB pioneers get snowed on fund-linked trades

As Basel capital reforms go live, risk managers eye early adopters’ progress and push to improve capital treatment of fund-linked products

Credit: montage

Canadian banks are pioneering users of new and untested trading book capital rules. And what they’re discovering about the treatment of fund-linked derivatives may be unwelcome news for countries set to follow in their footsteps.

The new rules under the Fundamental Review of the Trading Book (FRTB) impose heavy capital requirements on structured products with a performance linked to investment funds – especially those that don’t allow a so-called look-through approach. 

“It’s not like it’s just a

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