Significant weaknesses in the Basel capital framework for trading activities resulted in materially undercapitalised trading book exposures prior to the 2007–08 period of the financial crisis. To deal with the most pressing weaknesses, the BCBS introduced a set of revisions to the market risk framework in July 2009. Nonetheless, at the time, the BCBS recognised that a number of structural flaws in the market risk framework remained unaddressed.
In response, it undertook the Fundamental Review of the Trading Book (FRTB) to improve the overall design and coherence of the capital standard for market risk.
Consistent with the policy rationales underpinning three consultative papers on the FRTB, the BCBS published in January 2016 revised standards for minimum capital requirements for market risk. This revised market risk framework consists of the following key enhancements:
This document prepared by Management Solutions R&D department analyses these revised standards.
These revised standards, which are expected to be implemented by January 2019, apply to internationally active banks on a worldwide consolidated basis. They have been elaborated consistently with the policy rationales underpinning the BCBS consultative papers on the FRTB.
Scope of application:
Internationally active banks, on a worldwide consolidated basis.
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