Regulatory Responsibilities and Supervisory Framework

Sanjay Sharma and John Beckwith

“Market discipline should be the first line of defense, not regulators like me coming along and beating people over the head” – Andrew Bailey, Chief Executive Officer of the Financial Conduct Authority, Bank of England11 Andrew Bailey’s remarks to BBC Radio Scotland in January 2011, as reported in the Financial Times in 2016 (see–11e5–808f-8231cd71622e).

From a regulatory perspective, FRTB represents a new paradigm for operating, managing and monitoring the global framework for trading businesses. It is clearly more than an improved set of calculation protocols overlaid on new quantitative methodologies. It envisions that market risk supervision will become significantly more rigorous, contemporaneous and granular. Jurisdictional interpretations and rules could have a profound effect on the structure and competitive positioning of national banking systems and markets. However, what will not change is the fundamental objective of depository regulation: to ensure the financial stability of both individual institutions as well as that of entire financial systems.

In response to FRTB’s “final” release in January 2016, regulatory and

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