FRTB will spark rise in basis risk, firms warned

Dealers using the standardised approach may be incentivised to push clients towards less precise hedges

Banks might "push clients to move to standard risk factors and to accept basis risk themselves"

Banks may lose their appetite to warehouse basis risk on behalf of clients once the Basel Committee on Banking Supervision's incoming market risk capital rules enter force, market watchers are warning – something that could in turn push corporate clients to use less precise hedges.

Dealers using the sensitivities-based approach (SBA) for calculating their market risk charge under the Fundamental review of the trading book (FRTB), due to be implemented by January 1, 2019, will find client trades

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