F u nd am ental revi ew o f th e

trad i ng b o o k ( F RT B )
The revised market risk capital framew ork
and its implications
J anu ary 20 16

K ey h i g h li g h ts
Fundamental review of
the trading book design
vs. Basel 2 . 5
T h e F R T B ov erh au ls th e mark et risk capital
req u irements to meet th e ob j ectiv es of
th e Basel C ommittee ( th e C ommittee)
in its ef f ort to ad d ress sh ortcoming s of
th e cu rrent Basel 2.5 mark et risk capital
f ramew ork and red u ce th e v ariab ility of
mark et risk w eig h ted assets ( R W A ) across
j u risd ictions. F R T B d esig n f eatu res intend ed
to ach iev e th ese ob j ectiv es inclu d e:
M ore g ranu lar and prescriptiv e stand ard s
d esig ned to limit implementation
interpretations and promote consistency
across j u risd ictions
A rev ised trad ing b ook / b ank ing b ook
b ou nd ary w ith more ex plicit req u irements
f or inclu sions and ex clu sions of positions
and limitations on reclassifications to
red u ce th e scope f or arb itrag e
A n ov erh au l of th e I nternal M od els
A pproach ( I M A ) to f ocu s on tail risk ,
v ary ing liq u id ity h oriz ons, constrained
diversification and risk factor
ob serv ab ility stand ard s
S tring ent trad ing d esk - lev el I M A approv al
processes, including new profit and loss
( P& L ) attrib u tion tests to assess th e
impact of th e d if f erences in risk f actors
u sed in risk manag ement and b ank
pricing mod els
A n ov erh au l of th e S tand ard iz ed
A pproach ( S A ) to mak e it more risk sensitiv e and ex plicitly captu re d ef au lt
and oth er resid u al risk s, and serv e as a
floor for IMA charges

T h ese ch ang es are estimated b y th e

C ommittee to resu lt in an estimated 4 0 %
w eig h ted av erag e increase in total mark et
risk capital req u irements f rom cu rrent
lev els, w ith ind iv id u al b ank resu lts v ary ing
d epend ing on th e composition of a b ank s
trad ing portf olios.

C hanges from the prior

FRTB draft
The final FRTB contains certain
recalibrations and modifications from the
prior d raf t proposal. K ey areas of ch ang e in
the final standards include:
T h e ex tension of th e implementation
timeline as compared to prior C ommittee
commu nications; national su perv isory
ru le- mak ing is now req u ired b y J anu ary
20 19 , and b ank s are req u ired to
report u nd er th e new stand ard s b y 3 1
D ecemb er 20 19 , g iv ing b ank s more time
to implement th e su b stantial ch ang es to
mod els, d ata, tech nolog y and processes
need ed f or F R T B
N otab le S A recalib rations su ch as
th e introd u ction of a cap on th e
capital ch arg e of ind iv id u al cash
secu ritiz ations at th eir f air v alu e, low er
risk w eig h ts f or certain ex posu res
( su ch as non- C orrelation T rad ing
Portf olio secu ritiz ations and non- ex otic
instru ments su b j ect to th e R esid u al
R isk A d d - on) , and h ig h er risk w eig h ts
f or g eneral interest rate and f oreig n
ex ch ang e risk
N otab le I M A recalib rations su ch as
red u ctions in certain ex pected sh ortf all
( E S ) liq u id ity h oriz ons and th e lack

of application of th e capital ch arg e

mu ltiplier to non- mod ellab le risk f actors,
alth ou g h th e b ase mu ltiplier applied to
th e E S capital ch arg e h as b een increased
to 1.5 f rom 1
Modifications to risk-theoretical P&L
calcu lations th at no long er req u ire th e
u se of pricing mod els emb ed d ed in th e
b ank s E S mod els to measu re P& L b u t
instead th e P& L th at w ou ld b e prod u ced
b y th e b ank s pricing mod els if th ey only
inclu d ed th e risk f actors u sed in risk
manag ement mod els
Modifications to hypothetical P&L
calcu lations th at no long er req u ire th e
u se of b ook s and record s P& L b u t
th e P& L prod u ced b y th e b ank s pricing
mod els

Areas not final or subject

to change
T h e C ommittee ack now led g es th at certain
areas req u ire f u rth er w ork or may b e
su b j ect to f u rth er ch ang e, inclu d ing :
T h e calib ration of th e S A as capital
charge floor for the IMA
The finalization of P&L attribution test
th resh old s
T h e stand ard s f or Pillar 3 d isclosu re
req u irements, w h ich w ill b e proposed in a
separate pu b lic consu ltation
The finalization of the revised credit
v alu ation ad j u stment f ramew ork u sing
th e F R T B f ramew ork

E x ecu ti ve su m m ary
Introduction
T h e Basel C ommittee s ov erh au l of th e mark et risk reg u latory capital
f ramew ork is h ere. I n a j ou rney th at started in 20 111 to ad d ress th e
sh ortcoming s of th e cu rrent mark et risk capital f ramew ork 2 ( h erein
ref erred to as Basel 2.5) and d esig n a minimu m capital stand ard f or
mark et risk to b e more u nif ormly applied across j u risd ictions, 3 th e
Basel C ommittee on Bank ing S u perv ision ( th e C ommittee or BC BS )
pu b licly released th e new mark et risk f ramew ork , F u nd amental
rev iew of th e trad ing b ook ( F R T B) on 14 J anu ary 20 16 .4

resu lts, d epend ent u pon th e composition of th

F u rth er, th e C ommittee estimated th e F R T B w
w eig h ted av erag e increase in total mark et risk
compared to th e cu rrent Basel 2.5 f ramew ork

eir trad ing portf olios.

ill still resu lt in a 4 0 %
capital req u irements as
.6

T h e ch ang es th at mu st b e mad e to b ank s inf rastru ctu res to

implement th e F R T B stand ard s are transf ormational. T h e req u ired
d ata and tech nolog y ch ang es need ed to su pport analy z ing th e
cov erag e of risk f actors in risk and pricing mod el arch itectu re and
enh ance mark et d ata ob serv ab ility processes u nd er th e internal
Highlights of the final FRTB relative to the most recent draft proposal5
models approach are significant, and the standardized approach
inclu d e a relax ed implementation timeline relativ e to prior C ommittee
req u irements
f actor sensitiv ities w ill also req u ire
communications,
modified profit and loss (P&L) calculation
Jan standards
Jan
Janto u se g ranu lar risk Dec
2018
an ov erh au2019
l of cu rrent mark et risk2019
capital calcu lations and processes.
2016
f or2011
th e implementation of th e P& L attrib u tion tests u sed
to assess
While detailed implementation requirements will be further defined
internal risk mod el alig nment w ith th e b ank s pricing mod els, and
by rule-making in each jurisdiction, given the significance of the
certain recalib rations thRule-making
at th e C ommittee h as estimated w illMonitoring
resu lt inand recalibrations
ing es, b ank s sh ou ld q u ick ly lau nch or accelerate th eir strateg ic
ch ang
low er, on av erag e, ind u stry - w id e mark et risk w eig h ted asset ( N R ational
W A ) ru le- mak
T B prog
rams. T h is w ill allow b ank s to th orou g h ly consid er th e
increases th an w ere estimated in Q u antitativ e I mpact S tu d y M4 onitoring
( Q I S 4 ) . and F R approv
al process*
b u siness strateg y and implementation implications and mak e F R T B
H ow ev er, th e F R T B also inclu d es certain recalib rations th at may
Institutional
implementation
program
choices early enough to meet the significant demands of
leav e some b ank s w ith h ig h er mark et R W A relativ e to th e Q I S 4
F
R
T
B
implementation.
* S u b j ect to reg u latory
Relevant papers

QIS

clarif ication and may v ary

J an 20 11 M essag es f rom th e
A pr 20 14 1st Q I S
b y j u risd iction
acad emic literatu re
J u l 20 14 2nd Q I S
M ay 20 12 1st consu ltativ e paper
Q 2 20 15 3 rd Q I S
J an 20 13 R C A P, mark et R W A
Q 3 20 15 4 th Q I S
O ct 20 13 2nd consu ltativ e paper
M ar 20 14 A nnex to 2nd
National
supervisors are expected to issue final regulations by January 2019, with banks required to report under the new standards by
consu ltativ e paper
inalizeted
ed implementation b y 20 18F inal
irst
y earommittee
. T h e ex tension allowL atest
s ad d f itional
time to implement th
D end
ec 20 2014 19
3 .rd Prior
consu C ltativ
e paper commu nications F targ

Implementation timeline

T B
significant changes to data, technology and businessF Rstrategy
required to addressnational
FRTB.
stand ard s

L eg end :

stand ard s

Jan
2016

Jan
2011

BC BS

Rule-making

N ational

reporting
d ate
Jan
2019

2018

Dec
2019

Monitoring and recalibrations

N ational ru le- mak ing

Institutions

M onitoring and approv al process*

Institutional implementation
Relevant papers

QIS

J an 20 11 M essag es f rom th e
acad emic literatu re
M ay 20 12 1st consu ltativ e paper
J an 20 13 R C A P, mark et R W A
O ct 20 13 2nd consu ltativ e paper
M ar 20 14 A nnex to 2nd
consu ltativ e paper
D ec 20 14 3 rd consu ltativ e paper

L eg end :
BC BS
N ational

Institutions

| A ll Rights Reserved

Ernst & Y oung LLP

A pr 20
J u l 20
Q 2 20
Q 3 20

14
14
15
15

1st Q
2nd Q
3 rd Q
4 th Q

IS
IS
IS
IS

* S u b j ect to reg u latory

clarif ication and may v ary
b y j u risd iction

F inaliz ed
F R T B
stand ard s

F inal
national
stand ard s

L atest f irst
reporting
d ate

FRTB market risk capital components

The illustration below presents a simplified depiction of the market risk capital charge components under FRTB and a comparison to the
components u nd er Basel 2.5.

FRTB Pillar 1 capital charge components

Basel 2.5
Pillar 1
components

Internal models approach

(IMA)

Expected
shortfall
(ES)

Nonmodellable
risk factors
(NMRF)

VaR1
+
Stressed
VaR 1

Partially
addressed
through RNiV
add-ons in
certain
jurisdictions

Standardized approach
(SA)

Default risk
charge
(DRC)

Incremental
risk charge
(IRC)2

Sensitivitybased
risk charge

Default
risk charge
(DRC)

Standardized charge3

Residual
risk add-on

No Pillar 1
charge

S ecu ritiz ation positions are inclu d ed in th e v alu e- at- risk ( V aR ) and stressed - V aR measu res u nd er Basel 2.5. F R T B req u ires th at
secu ritiz ation positions b e ex clu d ed f rom th e I M A and inclu d ed only in th e S A .
2
M od eled d ef au lt risk ch arg es f or correlation trad ing positions ( C T Ps) are measu red th rou g h th e compreh ensiv e risk measu re u nd er
Basel 2.5. F R T B req u ires C T Ps to b e capitaliz ed u nd er th e S A .
3
Certain jurisdictions apply Basel 2.5 standardized charges only for products with specific risk that have not received internal model
approv al. A d d itionally , certain j u risd ictions req u ire d e minimis ch arg es f or positions not inclu d ed in V aR u nd er Basel 2.5.
1

It is important to note that under FRTB, the SA will act as a floor and thus act as a minimum to the Pillar 1 capital charges under IMA,
whereas under Basel 2.5 an SA floor existed only for correlation trading portfolios subject to the CRM. Additionally, for some banks that may
red esig nate th e reg u latory capital treatment of instru ments b etw een trad ing and b ank ing b ook s, a related Pillar 1 su rch arg e w ill ex ist th at w ill
not allow b ank s to receiv e a red u ction in th eir total capital ch arg e as a resu lt of su ch red esig nations.

Fundamental review of the trading book |

Final FRTB design

T h e F R T B retains th e core elements of th e d raf t proposals to ov erh au l
th e cu rrent mark et risk capital f ramew ork to meet th e C ommittee s
ob j ectiv es to enh ance risk measu rement and red u ce mark et R W A
variability across firms and jurisdictions. Key revisions relative to the
Basel 2.5 f ramew ork d esig ned to ach iev e th ese ob j ectiv es inclu d e:

I nclu d es f ormal mark et d ata ob serv ab ility stand ard s req u iring
risk - f actor- lev el analy sis to d emonstrate th at risk f actors meet
real price criteria to su pport th e elig ib ility of risk f actors w ith in
th e E S measu re or b e su b j ect to an alternativ e non- mod ellab le
risk f actor ( N M R F ) ad d - on ch arg e

A more prescriptive trading book definition with tighter restrictions

on trading book/banking book reclassifications that will reduce
reg u latory arb itrag e

R eplaces th e cu rrent incremental risk ch arg e ( I R C ) w ith a d ef au lt

risk ch arg e ( D R C ) as th e mod elled measu re f or d ef au lt risk th at
now h as mand atory inclu sion of eq u ities

A rev ised internal mod els approach th at:

R eplaces th e cu rrent 9 9 % , 10 - d ay v alu e- at- risk ( V
V aR approach w ith a 9 7 .5% stressed ex pected sh
improv e th e measu rement of tail- risk ( th rou g h th
tail losses) , accou nt f or mark et liq u id ity ( th rou g h
h oriz ons) , and recog niz e stressed correlations ( th
on diversification benefits)

A rev ised stand ard iz ed approach th at:

aR ) / stressed ortf all ( E S ) to
e av erag ing of
v ary ing liq u id ity
rou g h restraints

Is more risk-sensitive through the use of granular first- and

h ig h er- ord er risk f actor sensitiv ities in th e d elta, v eg a, and
cu rv atu re ch arg es b ased on internal pricing mod els
Specifically capitalizes default and other risks through explicit
D R C and resid u al- risk ad d - on ch arg es
Upon further calibration, will act as a minimum (floor) to the
internal mod els approach - b ased Pillar 1 capital ch arg es

R eq u ires, f or all trad ing b ook positions, mod el approv al at a

trad ing - d esk lev el th at is d epend ent u pon passing b ack - testing
and new P& L attrib u tion req u irements d esig ned to monitor th e
impacts of th e u se of d if f erent risk f actors in risk mod els v ersu s a
b ank s pricing mod els

C hanges from Q IS 4
The FRTB contains several recalibrations that will lead to changes in the overall capital impact of the final FRTB relative to earlier drafts
of the framework. The Committee has described that the final FRTB, although recalibrated to lower market RWA relative to QIS 4 results,
is still estimated to resu lt in a 4 0 % w eig h ted av erag e increase in total mark et risk capital req u irements compared to th e cu rrent Basel 2.5
f ramew ork . T h e F R T B also h as sev eral ch ang es th at w ill mod if y implementation ef f orts.
Notable changes, recalibrations and other modifications from QIS 4 are summarized in the table below.

FRTB final rule vs. QIS 4

Internal Models Approach

T h e b ase mu ltiplication f actor applied to th e internal mod el capital

ch arg e is increased to 1.5 f rom 1.
E S liq u id ity h oriz ons are now capped at 120 d ay s, w ith notab le
red u ctions f or cred it and eq u ity risk s.
N M R F ch arg es are no long er su b j ect to th e internal mod el capital
ch arg e mu ltiplier.
N M R F s f rom id iosy ncratic cred it spread risk may apply th e same
stress scenario and a z ero correlation assu mption may b e mad e
w h en ag g reg ating g ains and losses su b j ect to su perv isory approv al.
I M A D R C liq u id ity h oriz on f or eq u ities is red u ced to 6 0 d ay s f rom one
y ear.
E S q u antitativ e stand ard s no long er ref erence req u irements f or u se
of f u ll- rev alu ation.
L ook - b ack period f or stressed period calib ration h as b een sh ortened
to 20 0 7 f rom 20 0 5.
V end ors are recog niz ed as acceptab le sou rce f or real price d ata,
su b j ect to certain cond itions.
H y poth etical P& L calcu lations now ref erence u se of b ank pricing
mod els and not b ook s and record s.
R isk - th eoretical P& L calcu lation is now th e P& L prod u ced b y b ank s
pricing models using risk factors captured in ES but not specifically
th e E S risk mod el.
I nternal mod els approv al stand ard s now ref erence th at su perv isors
may continu e to g rant mod el approv al u nd er rare circu mstances
w h ere a b ank h as b reach ed b ack testing or P& L attrib u tion th resh old s
d u e to ex traord inary circu mstances su ch as a maj or reg ime sh if t or a
period of significant cross-border financial market stress

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Ernst & Y oung LLP

Standardized Approach
G eneral interest rate risk and f oreig n ex ch ang e risk w eig h ts are
increased .
Base v eg a risk w eig h ts f or interest rate risk and all cred it spread risk
classes are increased .
A cap at f air v alu e to th e capital ch arg e of ind iv id u al cash
secu ritiz ations is introd u ced .
R isk w eig h ts are low ered f or certain b u ck ets w ith in ind iv id u al risk
classes, w ith notab ly larg e d ecreases f or non- correlation trad ing
portf olio secu ritiz ations.
N ew b u ck ets w ith low er risk w eig h ts are inclu d ed f or certain prod u cts
su ch as cov ered b ond s .
R esid u al risk ad d - on f or instru ments w ith ex otic u nd erly ing s ( su b j ect
to a 1% risk w eig h t) su ch as w eath er d eriv ativ es and v olatility sw aps)
are d if f erentiated f rom oth er resid u al risk s ( su b j ect to a 0 .1% risk
w eig h t) in prod u cts su ch as path d epend ent options, b ask et options,
and instru ments w ith prepay ment risk .
L iq u id ity H oriz ons are red u ced u nd er th e v eg a risk ch arg e f or th e F X ,
small cap eq u ity , and all cred it risk classes, in alig nment w ith I M A .

O ther requirements and features

T h e F R T B h as ad d itional risk manag ement and reporting
req u irements and oth er f eatu res th at may req u ire caref u l
implementation planning beyond the specific efforts to implement the
I M A and S A . T h ese inclu d e:
I ntrad ay limit req u irements to prepare, ev alu ate and h av e av ailab le
f or su perv isors inf ormation on intrad ay limits u tiliz ation and
b reach es f or b ank s w ith activ e intrad ay trad ing
M ark et liq u id ity req u irements f or b ank s to prepare inf ormation on
inv entory ag ing and mark et liq u id ity
D aily monitoring ex pectations f or b ank s to manag e th eir mark et
risk in su ch a w ay th at th e capital req u irements are met on a
continu ou s b asis, inclu d ing th e close of each b u siness d ay
S tress- testing req u irements to h av e b ank w id e and trad ing d esk lev el stress- testing prog rams to id entif y and measu re th e risk of
scenarios th at stress f actors th at cou ld g enerate ex traord inary
trad ing b ook losses
Potential entity - lev el capital calcu lations f or su perv isors to monitor
th e mark et risk of ind iv id u al entities on a non- consolid ated b asis
and th e recog nition th at th ere may b e circu mstances in w h ich
su perv isory au th orities req u ire th e ind iv id u al risk positions f rom
certain entities to b e tak en into th e measu rement sy stem w ith ou t
any of f setting or netting ag ainst risk positions in th e remaind er of
th e g rou p

O pen requirements
Despite the FRTB being final, the Committee acknowledges that
aspects of th e F R T B w ill b e su b j ect to new or potentially d if f erent
req u irements th at w ill ev olv e prior to th e ef f ectiv e d ate. A spects of
the FRTB identified by the Committee that may change include:
The calibration of the SA floor to the IMA charges
P& L attrib u tion test th resh old s, w h ich also may ch ang e su b j ect to
th e monitoring
Pillar 3 d isclosu re req u irements, w h ich w ere pu b lish ed in d raf t f orm
in prior publications but were not included in the final FRTB and
will be proposed for public consultation and finalized in a separate
BC BS pu b lication

Credit valuation adjustment (CVA)

commentary
T h e C ommittee also restated th at th e ou tstand ing proposal on th e
C V A stand ard s7 w ill b e incorporated into th e F R T B f ramew ork , on
a stand - alone b asis, w h en th e C V A stand ard s are complete. T h e
C ommittee d id not prov id e f u rth er g u id ance as to th e proposed
implementation timing or u pcoming rev isions to th e C V A stand ard s.

Infrastructure considerations
For many banks, FRTB implementation will require significant changes
to current market risk infrastructure. Specific initiatives may include:
C omparing risk f actors captu red in risk manag ement mod els to
th ose captu red w ith in a b ank s pricing mod els, to h ig h lig h t potential
d riv ers of elig ib ility test f ailu re and assist in prioritiz ing risk
manag ement mod el enh ancements to inclu d e ad d itional risk f actors
w h ere applicab le
C omparing th e b ank s cu rrent meth od olog ies to measu re risk f actor
sensitiv ities to th e prescrib ed meth od olog ies u nd er th e sensitiv ity b ased approach and u nd ertak e remed iation ef f orts to su pport th e
S A calcu lation
I d entif y ing sou rces of g aps in transaction d ata th at meet real
price criteria and d etermining th e inf rastru ctu re and processes
req u ired to remed iate su ch g aps
D etermining ad d itional h istorical risk f actor time series d ata
cov erag e b ack to 20 0 7 need ed to su pport th e calib ration of th e E S
mod el to a stressed period
A naly z ing sou rces of ref erence d ata need ed to prod u ce E S and S A
measu res
Assessing the hardware and calculation efficiency efforts needed to
meet th e increased d emand s f or compu tation and d ata storag e
FRTB programs should also coordinate with other in-flight programs
su ch as b ank s BC BS 23 9 8 prog rams, U ncleared M arg in R u le
S tand ard I nitial M arg in M eth od olog y 9 prog rams f or non- centrally
cleared d eriv ativ es, stress testing enh ancement prog rams, and P& L
ex plain initiativ es, as applicab le, all of w h ich w ill lik ely sh are common
components, d ata attrib u tes and / or calcu lations w ith th e F R T B
f ramew ork .

Footnotes
Basel C
Basel C
3
Basel C
4
Basel C
5
Basel C
6
Basel C
7
Basel C
8
Basel C
9
IS D A W
h ttp: / / w
1
2

ommittee on Bank ing S u perv

ommittee on Bank ing S u perv
ommittee on Bank ing S u perv
ommittee on Bank ing S u perv
ommittee on Bank ing S u perv
ommittee on Bank ing S u perv
ommittee on Bank ing S u perv
ommittee on Bank ing S u perv
ork ing G rou p on M arg in R eq u
w w 2.isd a.org / attach ment/ N z

ision, J anu ary 20 11, h ttp: / / w w w .b is.org / pu b l/ b cb s_ w p19 .pd f

ision, D ecemb er 20 10 , h ttps: / / w w w .b is.org / pu b l/ b cb s19 3 .pd f
ision, J anu ary 20 13 , h ttp: / / w w w .b is.org / pu b l/ b cb s24 0 .pd f
ision, J anu ary 20 16 , h ttps: / / w w w .b is.org / b cb s/ pu b l/ d 3 52.pd f
ision, J u ly 20 15, h ttp: / / w w w .b is.org / b cb s/ q is/ instr_ impact_ stu d y _ j u l15.pd f ( see A nnex I )
ision, J anu ary 20 16 , h ttps: / / w w w .b is.org / b cb s/ pu b l/ d 3 52_ note.pd f
ision, J anu ary 20 16 , h ttp: / / w w w .b is.org / b cb s/ pu b l/ d 3 25.pd f
ision, J anu ary 20 13 , h ttp: / / w w w .b is.org / pu b l/ b cb s23 9 .pd f
irements I mplementation I nitiativ e, F eb ru ary 20 15,
I 2M w = = / I S D A % 20 W G M R % 20 w eb cast% 20 F I N A L % 20 slid es.pd f

Fundamental review of the trading book |

Actions to be considered
The need both to analyze the impacts of the FRTB recalibrations and changes on a banks business and to plan for the
significant implementation efforts warrants immediate action by banks, including:
Developing rule interpretations and assumptions
that will impact the banks view of implementation
requirements prior to launching projects
Updating RWA impact analyses to reflect the updated
liquidity horizons, risk weights and other changes from
QIS 4 to enhance the estimate of FRTB RWA impacts
at various levels (e.g., top of the house, specific lines of
business, trading desks)
Increasing FRTB communication with senior
management and the front office, to increase
awareness and engagement regarding the
implementation timing of the FRTB, the national
supervisory rule-making status, the anticipated RWA
impacts, business strategy and enterprise capital
planning considerations and the anticipated size and
scale of the banks FRTB program and related
resource needs
Forming business strategy and capital optimization
working groups or projects, to further analyze the
drivers of FRTB pro forma RWA to allow for early
identification of priority work streams, and assessment
of future potential market impacts of the FRTB (e.g.,
market liquidity, bid-ask spreads, pricing, profitability)

Executing gap analysis and project planning efforts

to assess the banks current state infrastructure and
relevant in-flight programs against the FRTB key
requirements to identify critical gaps
Identifying areas with the longest implementation
lead times such as modelling, data and overall risk
infrastructure enhancements that will be needed
not only for minimum compliance but also for RWA
optimization strategies through pursuing model
approval
Launching strategic FRTB implementation programs,
migrating from tactical working groups and QIS
execution teams, formalizing the governance, oversight
and accountability of stakeholders, and developing
resource and budget needs across the bank

Contacts
US

UK

Michael Sheptin
Principal
Tel: + 1 212 773 6032
Email: michael.sheptin@ey.com

Dr. Sonja Koerner

Partner
Tel: + 44 78 6767 6491
Email: skoerner@uk.ey.com

Manhua Leng
Principal
Tel: + 1 212 773 2891
Email: manhua.leng@ey.com

Shaun Abueita
Director
Tel: + 44 207 951 0067
Email: sabueita@uk.ey.com

Young Wang
Principal
Tel: + 1 212 773 2958
Email: young.wang@ey.com

Lionel Stehlin
Director
Tel: + 44 20 7951 2432
Email: lstehlin@uk.ey.com

Qun Zuo
Executive Director
Tel: + 1 212 773 6974
Email: qun.zuo@ey.com

Neil Thewlis
Director
Tel: + 44 20 7951 6019
Email: nthewlis@uk.ey.com

Iskander R. Zabikhodjayev
Senior Manager
Tel: + 1 212 773 8942
Email: iskander.zabikhodjayev@ey.com

Non-modellable risk factors

Expected shortfall
P&L attribution

Residual risk add-on

Risk theoretical P&L

Trading book boundary

Disclosures

Higher-order risk

Linear risk

Stress testing

Greg Diiorio
Senior Manager
Tel: + 1 212 773 0694
Email: greg.diiorio@ey.com

Desk-level model approval

Liquidity horizons

Sensitivity-based approach

Market data time series Default risk

Intraday monitoring Hypothetical P&L

FRTB

charge

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