FRTB’s risk factor framework is more punitive than it seems
Regime’s constraints may mean risk factors drop in and out of modellability far more frequently than dealers think
Thomas Obitz is founder and director of RiskTransform, a London-based consultancy advising banks on regulatory change
Of all the contentious parts of the Basel Committee's new market risk framework, risk factor modellability is perhaps the most vexing. Dealers are already expecting capital add-ons for risk factors that can't be modelled to account for roughly a third of their market risk capital
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
More on Risk management
FICC to launch new default fund before UST clearing mandate
Clearing members expected to welcome FICC’s plans to separate loss mutualisation from margin
Destabilising: is stablecoin deposit drain a bank funding risk?
While some fear a trillion-dollar flight to stablecoin, others doubt crypto is an existential threat for banks
XVA Benchmarking: explore the data
Take a deep dive into the findings of our 30-bank study, with interactive charts covering XVA optimisation, regulation and tech stacks
Op risk data: Ghost of Madoff still haunts HSBC
Also: Giant loan frauds hit three global banks, and AWS outage casts a cloud. Data by ORX News
Lloyds draws a (second) line on AI risk
Model risk office is accountable for managing the risk of AI roll-out at the UK bank
Half of European banks already embed FRTB into XVA pricing
US and rest of world lag Europe in incorporation of Basel capital rules into XVA calculations, Risk Benchmarking analysis shows
Fitch Solutions Toolkit for Credit Risk Leaders: enhancing credit risk management, mitigation and strategic decision-making
The Fitch Solutions Toolkit for Credit Risk Leaders is a practical guide to enhancing visibility, agility and control across the credit risk workflow
Dealers favour central XVA desks, but splits remain on funding
Most banks run a single desk within the front office, but more than half share responsibility for its funding needs with treasury
