17.01.2019 / 09:00

FRTB 2019: Most important amendments at a glance

Financial Markets

Governance, Risk Management, Compliance

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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