FRTB: Fundamental Review of the Trading Book

The right data for FRTB Standardized and Internal Models Approach

Fundamental Review of the Trading Book (FRTB) is a banking regulation that sets minimum capital requirements for market risk. FRTB prevents capital arbitrage between the trading and banking books, introduces expected shortfall (ES) as a risk measure and imposes a risk factor eligibility test (RFET) as part of the internal models approach (IMA).

Getting FRTB right the first time means a smoother implementation, defensible assessments of trading book modellable risk factors, calculations of expected shortfall, P&L attribution and market risk capital. Put a long-term capability immediately in place for Fundamental Review of the Trading Book approaches to:

• construction of risk factor time series and sensitivities
• liquidity horizon analysis
• risk factor analysis
• stressed time series analysis and data proxy
• P&L attribution and back-testing

Minimum capital requirements for market risk capital

Fundamental Review of the Trading Book is the BIS Basel Committee market risk framework that regulates the trading book vs banking book boundary. It revises the internal models approach and standardized approach for market risk capital management and introduces expected shortfall, which is a measure of risk under stress and incorporates market illiquidity. Valid, granular market data, from 2007 onwards, needs to be stored and accessible. Banks that have implemented their BCBS 239 risk data aggregation capability will be able to leverage similar methods for some of the trading book capital requirements.

Depend on GoldenSource for the best way to ensure success with the data challenges linked to Fundamental Review of the Trading Book.

FRTB makes every point on every curve important, and our data model supports that. Use GoldenSource for confidence with the sensitivities based method, standardised default risk charge, residual risk add-ons, expected shortfall, P&L attribution and back testing.

Our core software is rock solid and is complete with everything our clients need. Modules can be added to expand capabilities and configured to their exacting needs. Our process assures implementation in weeks, not months.