FRTB: Basel guidance on backtesting frustrates dealers

Dealers blast “illogical” carve-outs for backtesting exceptions

Business people struggling with figures
Struggling with the figures: “This doesn’t make sense," says one market risk specialist

Dealers have been left frustrated by the Basel Committee’s response to questions on model backtesting under the revised market risk framework. One dealer complains the provisions – which seek to clarify the circumstances in which trading desks can ignore backtesting breaches that are attributable to illiquid risk factors – “make no sense”, while others interpret them as likely to load unjustified capital charges on to banks.

The committee’s FAQ document, published on January 26, addressing

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