FRTB AND THE NEXT GENERATION OF RISK FRAMEWORK DATA
- Published: 11 September 2019
Introduced as a framework in 2016, the FRTB regime is planned for a phased rollout from 2022. The new approach utilizes an alternative method of measuring market risk using expected shortfall (ES) as the primary exposure measure instead of VaR, while also ensuring alignment of the front office desk models with market risk calculations for their internal models.
FRTB represents the next generation of market risk regulatory capital rules for large, international financial institutions. It has also encouraged vendor solutions to develop alternative offerings that can help firms implement new risk management capabilities. Many firms are investing significant time and effort to address these challenges as NMRFs can constitute a large proportion of the capital charges.
As a result, Capco and Market Data Company have developed a set of methodologies and processes for identifying, evaluating, optimizing, and sourcing appropriate market data for risk management. We believe that these cornerstones are vital to ensuring ongoing robust risk management and capital adequacy framework. These components are relevant across all firms; whether they are looking to implement FRTB or raise the bar of their operating effectiveness and benefit from extended data and solution offerings.