528:(i.e. as opposed to VaR) at a 97.5% quantile, with differentiated “liquidity horizons” for five categories of instruments (standard 10 days previously); the expected loss is calibrated to the one-year period of the most severe stress since 2005. For non-modellable risk factors, those where appropriate data does not exist,
486:
As for other Basel frameworks, the
Standardised Approach is directly implementable, but, at the same time, carries more capital; whereas the Internal Models approach, by contrast, carries less capital, but the modelling is more complex. More specifically, the calculations incorporate the above
507:. A capital charge is calculated here for three correlation scenarios, multiplying the sensitivities by supervisory risk-weights, and then applying rules for trade-by-trade and then overall aggregation, with the largest finally used. (ii) A default risk charge, capturing any
437:, usually customer loans, and deposits from retail and corporate customers; important since the "vast majority of losses were from trading books during the 2008 crisis"
187:
495:, the mimimum capital requirement is the sum of three components: (i) Sensitivities-based capital, for seven risk classes, which reflects linear risks via their
466:
FRTB additionally sets a "higher bar" for banks to use their own, internal models for calculating capital, as opposed to the standardised approach. Here, for a
401:
in
October 2013. Following feedback received on the consultative document, an initial proposal was published in January 2016, which was revised in January 2019.
165:
386:
532:
are used as a proxy. Capital requirements are calculated on the level of trading desks and are aggregated for the whole trading book. To this is appended a
372:
330:
70:
248:
417:
352:
214:
30:
714:
685:
627:
556:
411:
209:
160:
854:
394:
872:
809:
781:
797:
323:
306:
253:
897:
562:
221:
887:
316:
243:
197:
60:
55:
825:
577:
529:
133:
769:
892:
508:
504:
360:
182:
128:
846:
644:"Fundamental review of the trading book: A revised market risk framework - consultative document"
525:
441:
434:
868:
850:
710:
681:
623:
500:
496:
460:
271:
238:
864:
112:
99:
94:
757:
276:
170:
148:
143:
511:. (iii) A residual risk add-on, appended for other market risks not captured, such as
881:
475:
471:
445:
35:
533:
512:
467:
449:
430:
426:
175:
103:
433:": i.e. assets intended for active trading; as opposed to assets expected to be
376:
356:
297:
204:
155:
614:
470:
to qualify for the internal models approach, its model must pass two tests: a
281:
453:
382:
138:
50:
701:
672:
390:
45:
729:
643:
90:
40:
743:
731:
International
Convergence of Capital Measurement and Capital Standards
745:
An internal model-based approach to market risk capital requirements
616:
Explanatory note on the minimum capital requirements for market risk
409:
The FRTB revisions address deficiencies relating to the existing
108:
821:
793:
231:
226:
843:
Basel III Modelling: Implementation, Impact and
Implications
592:
826:
Basel IV: Revised
Internal Models Approach for Market Risk
595:. The Basel Committee on Banking Supervision. 28 June 2011
758:"Boundary between the trading book and the banking book"
798:
503:(for options) risk factors, and non-linear risks via
861:
524:approach, the mimimum capital requirement uses
820:For an overview of the calculations, see, e.g.,
792:For an overview of the calculations, see, e.g.,
709:. Basel Committee on Banking Supervision. 2019.
680:. Basel Committee on Banking Supervision. 2016.
622:. Basel Committee on Banking Supervision. 2019.
385:, is one of the initiatives taken to strengthen
452:under stress; thus ensuring that banks capture
760:, Basel Committee on Banking Supervision, 2020
748:. Basel Committee on Banking Supervision, 1995
734:. Basel Committee on Banking Supervision, 2006
579:Fundamental Review of the Trading Book (FRTB)
324:
8:
703:Minimum capital requirements for market risk
674:Minimum capital requirements for market risk
558:Minimum Capital Requirements for Market-Risk
22:International regulatory standards for banks
841:Ioannis Akkizidis, Lampros Kalyvas (2018).
573:
571:
331:
317:
15:
373:Basel III: Finalising post-crisis reforms
421:and particularly revisit the following:
546:
289:
263:
120:
82:
18:
389:, noting that the previous proposals (
353:Basel Committee on Banking Supervision
345:Fundamental Review of the Trading Book
31:Basel Committee on Banking Supervision
859:Sanjay Sharma, John Beckwith (2018).
552:
550:
7:
487:outlined enhancements, as follows.
377:Market risk § Regulatory views
482:Calculation of capital requirements
14:
810:MAR 30: Internal models approach
593:"The Basel Committee - overview"
351:), is a set of proposals by the
397:. It was first published as a
1:
782:MAR 20: Standardised approach
395:financial crisis of 2007–2008
381:The reform, which is part of
307:Business and Economics Portal
264:Pillar 2: Supervisory review
121:Pillar 1: Regulatory capital
563:International Monetary Fund
472:profit and loss attribution
290:Pillar 3: Market disclosure
914:
425:The boundary between the "
370:
418:Internal models approach
393:) did not prevent the
515:and behavioural risk.
493:Standardised Approach
412:Standardised approach
399:Consultative Document
371:Further information:
509:jump-to-default risk
387:the financial system
898:Capital requirement
361:capital requirement
129:Capital requirement
847:Palgrave Macmillan
526:expected shortfall
461:market illiquidity
442:expected shortfall
716:978-92-9259-237-0
687:978-92-9197-416-0
629:978-92-9259-236-3
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530:stress scenarios
435:held to maturity
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272:Economic capital
239:Operational risk
21:
19:Basel Framework
16:
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888:Bank regulation
878:
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772:, bankpedia.org
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522:Internal Models
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450:measure of risk
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113:Risk management
100:Monetary policy
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446:value at risk
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134:Capital ratio
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36:Basel Accords
34:
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29:
28:
27:
26:
17:
860:
842:
836:Bibliography
816:
805:
788:
777:
770:Banking book
765:
753:
744:
739:
730:
725:
702:
696:
673:
667:
655:. Retrieved
650:
638:
615:
609:
597:. Retrieved
587:
578:
557:
534:default risk
521:
492:
485:
465:
459:The risk of
431:banking book
427:trading book
416:
410:
408:
405:Key features
398:
380:
348:
344:
342:
249:Standardized
210:Standardized
104:Central bank
65:
893:Market risk
651:www.bis.org
474:test and a
444:instead of
440:The use of
429:" and the "
363:for banks.
357:market risk
205:Market risk
156:Credit risk
882:Categories
865:Risk Books
582:. risk.net
541:References
520:Under the
491:Under the
367:Background
355:for a new
298:Disclosure
282:Legal risk
95:Regulation
83:Background
828:, pwc.com
800:, pwc.com
505:curvature
454:tail risk
383:Basel III
359:-related
51:Basel III
824:(2016).
796:(2016).
657:17 April
513:gap risk
476:backtest
391:Basel II
46:Basel II
599:5 April
536:charge.
222:CVA vol
91:Banking
71:Endgame
41:Basel I
871:
853:
713:
684:
626:
565:, 2016
456:events
232:SA-CVA
227:BA-CVA
188:SA-CCR
149:Tier 2
144:Tier 1
707:(PDF)
678:(PDF)
653:. BIS
647:(PDF)
620:(PDF)
497:delta
448:as a
244:Basic
176:A-IRB
171:F-IRB
161:SA-CR
869:ISBN
851:ISBN
711:ISBN
682:ISBN
659:2022
624:ISBN
601:2019
501:vega
499:and
468:desk
415:and
375:and
349:FRTB
343:The
109:Risk
66:FRTB
61:NSFR
867:.
822:PwC
794:PwC
254:AMA
215:IMA
198:CCF
192:IMM
183:EAD
166:IRB
56:LCR
884::
863:.
849:.
845:.
649:.
570:^
561:.
549:^
478:.
111:/
102:/
93:/
719:.
690:.
661:.
632:.
603:.
347:(
332:e
325:t
318:v
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