New FRTB Reporting Requirements Are Fast Approaching, and Some Regions Have Yet to Announce Updates

The Fundamental Review of the Trading Book (FRTB) affects capital calculations and substantially impacts one’s risk monitoring framework. Richard Moss encourages readers to avoid betting on the long shot.

Financial institutions may be facing higher capital requirements based on the Basel Committee on Banking Supervision (BCBS) changes to FRTB. The deadline for implementing the new market risk FRTB reporting requirements is 2023. And certain jurisdictions must report even sooner – for example, under Capital Requirements Regulation 2 (CRR2). New FRTB reporting requirements affect how firms measure their market-risk capital charge and achieve consistency with other critical calculations, including the standardized approach for counterparty credit risk (SA-CCR) and credit valuation adjustment (CVA).

All these elements together will alter organizations’ capital requirements. To monitor their risk profiles, they will require flexibility, granular data drilled down to the trade level and an ability to create bespoke stress-test scenarios. Being ready for post time will require preparation across several areas of an institution.