PREPARING FOR FRTB ROLLOUT: FIRMS THAT HARNESS RELEVANT DATA CAN UNLOCK FUTURE BUSINESS BENEFITS

PREPARING FOR FRTB ROLLOUT : FIRMS THAT HARNESS RELEVANT DATA CAN UNLOCK FUTURE BUSINESS BENEFITS

  • Natasha Leigh Giles, Robert Benedetto and Edmond Farah
  • Published: 08 November 2019


With the Fundamental Review of the Trading Book (FRTB) planned for phased rollout beginning in 2022, firms that can master the ability to apply accurate and relevant data could unlock future business benefits under the new regime and strengthen the value-at-risk (VaR) framework for capital adequacy.

The new approach utilizes an alternative method of measuring market risk using expected shortfall (ES) as the primary exposure measure instead of VaR, while also ensuring alignment of the front office desk models with market risk calculations for their internal models. 

FRTB represents the next generation of market risk regulatory capital rules for large, international financial institutions. It has also encouraged vendor solutions to develop alternative offerings that can help firms implement new risk management capabilities.