REPORT: Fundamental Review of the Trading Book (FRTB)
The Fundamental Review of the Trading Book (FRTB) overhauls the market risk capital requirements to meet the objectives of the Basel Committee. In effect, it will act as a framework for the next generation of market risk regulatory capital rules for large and internationally active banks. The scale of transformation for banks to comply is huge, and banks need to identify the tasks and the resources needed in order to be ready for the 2019 deadline. Murex has collaborated with Risk.net to produce a special report into FRTB, which outlines the issues and challenges that banks need to be aware of.
In the report, Murex’s Head of Market Risk, Bruno Castor, outlines the challenges banks will face on the road to FRTB compliance. Castor argues that they must work in collaboration with their vendors and consultants to construct a new IT architecture, to ensure they are FRTB compliant. FRTB will require more than a systems upgrade, it will require a major overhaul of the systems’ architecture and revamp of data integration, processing and management.
In a panel discussion with market risk experts, Pierre Guerrier, FRTB Solution Specialist at Murex, discusses the opportunities that FRTB provides to overhaul frameworks and implement structural changes. Guerrier argues that FRTB is a game-changer for risk infrastructures and processes, and that for banks seeking to conserve or obtain approval of an internal model, the risk theoretical profit-and-loss (RTPL) attribution is by far the greatest challenge.