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Bracing for the FRTB: Capital, business and operational impact

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  • Farag, Hany M.

Abstract

We give an overview of the impact of the new standard of minimum capital requirement for market risk, commonly referred to as the FRTB (Fundamental Review of the Trading Book). We do not attempt to reproduce many formulas or minute details, which can be found in the regulatory text. Instead, we try to give a pragmatic overview which connects the pieces together and informs the reader of the potential actions needed to be taken in light of this new framework in market risk. The FRTB is probably the biggest change in market risk for two decades and is an evolutionary force that requires adaptations by the industry in order for it to continue to thrive. A proactive approach is important and we hope to provide a healthy impetus by highlighting the key aspects of the framework that require attention.

Suggested Citation

  • Farag, Hany M., 2017. "Bracing for the FRTB: Capital, business and operational impact," Journal of Securities Operations & Custody, Henry Stewart Publications, vol. 9(2), pages 160-177, March.
    • Handle: RePEc:aza:jsoc00:y:2017:v:9:i:2:p:160-177
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    Citations

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    Cited by:

    1. Orla Mccullagh & Mark Cummins & Sheila Killian, 2023. "The Fundamental Review of the Trading Book: Implications for Portfolio and Risk Management in the Banking Sector," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 55(7), pages 1785-1816, October.
    2. Orla McCullagh & Mark Cummins & Sheila Killian, 2023. "Decoupling VaR and regulatory capital: an examination of practitioners’ experience of market risk regulation," Journal of Banking Regulation, Palgrave Macmillan, vol. 24(3), pages 321-336, September.

    More about this item

    Keywords

    fundamental review; trading book; FRTB; market risk; regulatory capital;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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