Market risk modelling
Why FRTB models are on the edge of extinction
With only four banks known to be applying to use internal models for market risk, the fate of advanced modelling looks precarious
Model teams fear budget cuts as FRTB wipeout looms
Senior modellers think supervisory intervention is needed to prevent funding drought
RBC’s CVA capital charge up 22% since FRTB adoption
Bank eschewed revised standardised approach in favour of simpler yet constraining formulas
Santander USA cuts market risk charges by 16%
Trading risk consolidation under IHC inflates VAR charges, nets cut to total requirements
Credit Suisse USA posts trading loss for 288% of VAR
Swiss bank’s subsidiary one of only three US dealers to incur backtesting exception in Q1
JP Morgan SE allocates €318m for structural credit spread risk
Bank’s EU arm among first to disclose figure following EBA’s diktat on more granular monitoring of CSRBB
Japanese banks reap ¥9trn RWA savings from FRTB switch
Tokyo’s dealers fare better than overseas rivals on new CVA and market risk approaches
Lloyds’ standardised market risk charges tripled in Q1
Hedging-related setback pushes market RWAs to an all-time high
HSBC, StanChart SVAR charges hit multi-year highs
Stressed trading-loss measure makes up 43% of banks’ modelled market risk charges
ANZ’s end-period VAR spikes to highest in a decade
Interest rate risk drives 53% surge; market risk up A$1.6bn
Six Chinese banks set market risk records in Q1
Market RWAs spike 63% overall in first disclosures after rules update
HSBC, Intesa incorporate 2022–23 downturn into SVAR models
Turbulent past two years implied to be worse than GFC in stressed simulations
EBA’s correlated currencies shake-up raises EU banks’ charges
Capital requirements for FX risk double after EUR/USD and other 196 pairs deemed no longer in sync
Seven banks under SEC scrutiny over interest rate risk disclosures
Regulator-issued letters aim at boosting transparency on EVE and NII sensitivity
EU banks’ incremental risk charges soared in volatile H2
Charge for traded-bond default and downgrade risk hit 10-year high at BNP Paribas
Canada’s top dealers boost derivatives clearing as FRTB kicks in
BMO, RBC and TD Bank cleared record C$45.1 trillion in notionals in Q1
SVAR updates push Barclays’ modelled market charges up 9%
Trading portfolio regulatory risk gauge up 52% over the second half of 2023
Canadian banks’ market RWAs spike on FRTB switch
CIBC, TD Bank and Scotia saw end-January charges jump amid overall ditching of internal models at Canada’s Big Five
Credit Suisse USA rounds 2023 with fifth VAR breach
Wall Street unit’s capital multiplier ratchets back up to 3.4x
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
Citi, JP Morgan incurred record VAR overshoots in Q4
Peak single-day losses rank among worst for US banks post-pandemic
Loss of ruble volatility waiver costs UniCredit €2.2bn in RWAs
Lender forced to capitalise FX risk from Russian operations after ECB withdraws key exemption
VAR breaches trip up Citi, CS USA and two others in Q3
Comerica’s VAR multiplier ratchets up while Huntington’s remains at record high
FRTB managers face hard facts about risk factors
There are ways to reduce the capital charges caused by NMRFs, but they come at a price