Company: IBM Business Analytics
Category: Credit Risk
Published: 27 October 2015
With regulators rushing to complete their overhaul of trading book rules by year-end – and a recently launched impact study the last chance to assess and amend the framework – the industry is taking a closer look at the current proposals. Many banks are worried by what they see.
The workload will increase: banks that currently model their trading book capital requirements will have to start calculating standardised capital numbers in parallel, using a revised, more complex standardised approach.
Capital requirements could jump: the last impact study showed the new standardised approach was generating capital numbers that were five times higher than the current version. Those numbers will be used to set a floor for modelled capital.
Governance and communication challenges will emerge: VAR is being replaced with expected shortfall; modelled numbers will be supplemented by standardised ones. It won’t be easy to explain the new approaches or which ones analysts, investors and boards should be relying on.
Technology challenges will multiply: the new framework imposes a heavier calculation and reporting burden.
This webcast, sponsored by IBM, addresses the following questions: