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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

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