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July 18, 2017

Simplified Standardised Approach: 5 takeaways

On June 29, 2017, the Basel Committee on Banking Supervision (BCBS) published the first draft of its new Simplified Standardised Approach for market risk capital requirements, also known as the Fundamental Review of the Trading Book (FRTB).

The FRTB market risk capital requirements were finalised in January 2016 and already include a Standardised Approach. However, due to its complexity, the Standardised Approach presents considerable implementation challenges for smaller banks. Therefore, BCBS has now proposed a Simplified Standardised Approach, called the ‘reduced sensitivities-based method’ or R-SBM. Smaller banks can use this as an alternative.

The first draft of R-SBM is a consultative document that sets out the eligibility criteria and procedures to calculate market risk capital. The consultation period lasts until September 27, 2017, during which feedback is invited from market participants. All comments will be published on the BCBS website unless the market participants request otherwise.