12May
FRTB: Models, Processes, Systems and Technology impact on Banks 8172 Comments | By admin
What is the Goal of FRTB:
- Remove regulatory Arbitrage between Trading book and Banking book
- Capture Tail risks and liquidity risks
- Remove jurisdictional arbitrage in Capital
- Bring comparability between Internal Model Approach (IMA) and Standardized Approach (SA)
How will the banks with significant Trading operations be impacted:
- RWA will increase and the capital will increase for some businesses
- Banks will have to carefully decide the treatment of a product as a trading book of banking book
- Banks may have to shut down some desks/ products and optimize their capital charges
How can banks plan to systematically implement FRTB:
Figure below showing impact analysis of FRTB on Models, Processes, Systems and Data:
- FRTB will impact Bank Models, Processes, Systems and Data requirements
- Banks will have to conduct a detailed impact analysis and a target operating system
- Will have to conduct a business/ desk level review, with a capital impact analysis
- Make appropriate changes in Models, Reference Data and Market Data, systems and processes
- Put together a dedicated cross functional program management team to implement the changes bank-wide