FRTB: Is time still on your side?
In January 2019, the BCBS confirmed the delayed FRTB implementation date of 1 January 2022. With this extra time, banks now have an opportunity to re-evaluate their approach to FRTB. In many cases, the delay allows them to switch from a compliance focus to a more strategic approach, giving them an opportunity to align their front-office and risk systems and break down internal siloes, particularly for data sharing.
The latest research from Chartis, sponsored by IHS Markit, looks at how the delay will influence institutions' approach to FRTB. Following a number of interviews with industry representatives, Chartis has identified three key themes:
- A more strategic view. FRTB is acting as a catalyst for a more strategic review and restructuring of banks' approach and architecture for market risk.
- More pronounced benefit of the internal models approach (IMA) vs. the standardized approach (SA). The decision whether to go with the IMA or the SA has not always been obvious. The new guidance provides significant clarity and some relief with respect to the potential impact of NMRFs, allowing banks to finally lock down their FRTB programs.
- Data remains a key challenge. While the new guidance gives banks some leeway in passing eligibility tests, they will still need to maximize the availability of real price observations (RPOs) to manage the impact of NMRFs, either directly or via proxying.
You can read more about Chartis' findings by downloading the full whitepaper.
IHS Markit provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.
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