The BCBS has published a series of consultative documents reviewing the capitalization of trading activities and proposing measures to strengthen the regulatory capital framework for market risk established in BIS II and revisited in BIS 2.5 and BIS III.
In May 2012, the BCBS published the first consultative document in which it specified a series of measures to improve capital requirements for the trading book. The overall objective of the Committee was to design a new regulatory framework that would mitigate the weaknesses in risk measurement present in the internal models and the standardized approach for market risk. It also sought a more consistent implementation of capital requirements in order for them to be comparable across jurisdictions.
Later, in October 2013 the BCBS issued a second consultative document. It included further detail of the measures in the first document and a draft text which would be the new revised framework for market risk.
With the same aim as the previous two texts, the Committee has published a third consultative paper on the Fundamental Review of the Trading Book: outstanding issues. This paper takes into account the comments made by the entities, as well as the results of the Quantitative Impact Study (QIS). The adjustments it introduced a can be divided into three broad sections:
The new regulation is aimed at solving issues not adequately addressed in the previous regulation in terms of exposure to market risk in the trading book.
The paper analyzes the main aspects of the BCBS document and the implications derived from implementation of the new framework by financial institutions.
The third consultative document of the BCBS introduced a specific treatment for IRTs, a review of the standardized approach and the concept of liquidity horizon in internal models.
Download the technical note by clicking here (only in Spanish).
Latest technical notes released:
|Overview of the impacts and potential lines of action after the Basel III reform|
|Basel III: Finalising post-crisis reforms|
|Guidelines on PD estimation, LGD estimation and the treatment of defaulted exposures|
|Amendments of Circular 4/2017 on public and confidential financial information standards and formats, in relation with the Proyecto de Circular|
|Stress testing in the UK banking system: 2017 results|
© GMS Management Solutions, S.L., 2018. All rights reserved. The information contained on this publication is of a general nature and does not constitute a professional opinion or an advisory service. The data used in this publication come from public sources. GMS Management Solutions, SL assumes no liability for the veracity or accuracy of such data.