Coming out of the 2008 financial crisis, The Fundamental Review of the Trading Book (FRTB) has completely rewritten the Bank and infrastructure rules and rules to tighten the loopholes to determine internal risk model alignment with their current pricing models and how much capital banks must hold in order to offset their exposure to market risk and prevent major, future financial market disruptions. Banks will have to further assess their needs and strategies and approach to handling the new directives
FRTB is considered a 'patch' that addresses some of the shortcomings necessary to meet and bring forth more consistent identification of their risk management matrix of material risk factors across banks, while putting constraints on hedging diversification and also look towards new time horizons to meet the Basel Committee requirements.
This new methodology changes the way approvals are granted and policed, replacing the value-at-risk scenarios that anticipated shortages and altering the fine line between banking and trading records. vertiv remains current and committed to providing clients the counsel, tools and technology needed to stay within the FRTB ancillary guidelines - including exposure limits.
Many large banks will face significant challenges when this takes effect at the end of January 2019. It is crucial that banks get all this right, right out of the box. The changes to banks' infrastructures in implementing the data, technology changes and risk factors to comply with the FRTB standards are going to be transformational, and in most cases requiring an overhaul of their current market risk capital calculations and processes. Going forward, banks should be ready to launch or accelerate their FRTB programs.
Clients can look to vertiv for the guidance and tools needed to manage financial, risk and operational requirements and to be in compliance with global regulatory requirements. And as with the other areas within the industry, our programs reduce costs and compliance complexities.