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April 02, 2018

The changing shape of FRTB regulation

Minimum capital requirements for market risk

CRISIL GR&A examines the proposed revisions to FRTB


  • On March 22, 2018, the Basel Committee on Banking Supervision (BCBS) published the much-awaited consultative document on the revisions to FRTB. Since its release in January 2016, the new market risk standard has been met questions and concerns from market participants. The issues uncovered and feedback from all corners pointed to the massive impact of the rule on the banks and brought to light the challenges in its implementation 
  • The proposed changes attempt to address the issues highlighted by market participants in the implementation of the market risk standard. We believe the proposed revisions will facilitate a swift adoption of the market risk standard


The latest consultative document on minimum capital requirements for market risk proposes revisions to several aspects of FRTB. Banks have to respond to the proposals by June 22, 2018. The legislation comes in to effect from January 1, 2022, the date by which banks should be compliant. The timeline was revised earlier in December 2017 to give global banks more time to develop infrastructure for complying with the standard.


The proposed revisions are the BCBS’ response to the feedback from market participants over the last two years. Some of the aspects of the rule, such as the sensitivity of the P&L attribution (PLA) test metrics invited healthy criticism from practitioners, in particular from risk managers.


In what follows, we present in brief the proposed new face of FRTB and discuss what it means in practice.