FRTB 2019: Most important amendments at a glance

Scope of application

• General Trading book / Banking book boundary: Several clarifications regarding presumptive lists, explicit process for respective deviation
• Treatment of fund positions: Softer criteria for trading book allocation
• Structural FX positions: Limit for exclusion now linked to FX sensitivity of capital ratio (approval by supervisor needed)

Internal Model

• Revised P&L attribution test metrics: Spearman correlation and Kolmogorov-Smirnov test
• P&L attribution failure consequence softened: Introduction of traffic light approach
• Revision of non-modellable risk factor (NMRF) treatment:
  • Eased gap / number of observation rules
  • Common stress period for all NMRF
  • Recognition of diversification effects

Standardised Approach (SA)

• Reduction of risk weights
• FX risk: Introduction of „base currency“ approach, allowance of first order „triangulation“ regarding specified currency pairs eligible for SQR(2) rule on risk weights.
• Equity and credit spread risk: Simplified approach for index products (no mandatory decomposition anymore)
• Curvature charge:
  • Consistent shocks to similar risk factors
  • Double-counting FX risk adressed
  • Removal of cliff effects from aggregation method
• Modified „low correlation“ scenario

Simplified SA

• Introduction for banks with small or non-complex trading portfolios
• Application of Basel 2.5 framework with multipliers per risk class