BCBS published the final framework for market risk capital requirements and its work program for 2019. Also published was an explanatory note to provide a non-technical description of the overall market risk framework, the changes that have been incorporated into in this version of the framework, and impact of the framework. The note sets out a number of worked examples to illustrate the application of the standardized approach of the framework. This revised standard comes into effect on January 01, 2022.
The final market risk standard incorporates changes that were proposed in a March 2018 consultative document and has been informed by a quantitative impact based on data as of the end of December 2017. The revisions to the market risk framework endorsed by the Group of Central Bank Governors and Heads of Supervision (GHOS) enhance its design and calibration by:
- Introducing a simplified standardized approach for banks with small or non-complex trading portfolios
- Clarifying the scope of exposures that are subject to market risk capital requirements
- Enhancing the risk sensitivity of the standardized approach by revising the treatment of foreign exchange risk, index instruments, and options
- Revising the standardized approach risk-weights applicable to general interest rate risk, foreign exchange risk, and selected credit spread risk exposures
- Revamping the assessment process to determine whether a bank's internal risk management models appropriately reflect the risks of individual trading desks (the so-called profit and loss attribution test)
- Revising the requirements for identifying risk factors that are eligible for internal modeling and the capital requirement applicable to risk factors that are deemed "non-modelable"
The GHOS also endorsed the Basel Committee's strategic priorities and work program for 2019. The work program for 2019 focuses on four key themes:
- Finalizing ongoing policy reforms and pursuing targeted new policy initiatives, where needed
- Evaluating and monitoring the impact of post-crisis reforms and assessing emerging risks
- Promoting strong supervision
- Ensuring full, timely, and consistent implementation of the post-crisis reforms of the Basel Committee
- Press Release on BCBS Meeting
- Press Release on Market Risk Framework
- Final Market Risk Framework (PDF)
- Explanatory Note (PDF)
- Work Program for 2019
Effective Date: January 01, 2022
Keywords: International, Banking, Market Risk, Basel III, Standardized Approach, FRTB, Capital Framework, Work Program, BCBS
Previous ArticleGLEIF Publishes January 2019 Update on Global Regulatory Use of LEI
The Bank of England (BoE) published a consultation paper on approach to setting minimum requirement for own funds and eligible liabilities (MREL), an operational guide on executing bail-in, and a statement from the Deputy Governor Dave Ramsden.
The European Banking Authority (EBA) is seeking preliminary input on standardization of the proportionality assessment methodology for credit institutions and investment firms.
Certain regulatory authorities in the US are extending period for completion of the review of certain residential mortgage provisions and for publication of notice disclosing the determination of this review until December 20, 2021.
The Prudential Regulation Authority (PRA) published the policy statement PS18/21, which introduces an amendment in the definition of "higher paid material risk taker" in the Remuneration Part of the PRA Rulebook.
The European Banking Authority (EBA) published its annual report on asset encumbrance in banking sector.
The European Banking Authority (EBA) published a methodological guide to mystery shopping.
The Australian Prudential Regulation Authority (APRA) released a letter to authorized deposit-taking institutions to provide an update on key policy settings for the capital framework reforms, which will come into effect from January 01, 2023.
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) published a report that assesses the business continuity planning activities of financial market infrastructures or FMIs.
The Bank of England (BoE) published questions and answers (Q&A) on OSCA to BEEDS migration for statistical reporting as well a presentation from the project overview session held with statistical reporters.
The Basel Committee on Banking Supervision (BCBS) is consulting on a technical amendment to the Basel Framework to reflect a new process reviewing the global systemically important bank (G-SIB) assessment methodology.