GFMA, the International Swaps and Derivatives Association and the Institute of International Finance provide comments on the latest Basel Committee on Banking Supervision (BCBS) consultation paper (CP) on the Fundamental Review of the Trading Book (FRTB).
GFMA, ISDA and IIF letter on trading book default risk charge floor to the Sovereign Risk Task-Force
GFMA, ISDA and the IIF submitted a letter to the Basel Committee in response to its consultation on a simplified alternative to the standardized approach to market risk capital.
GFMA, the International Swaps and Derivatives Association (ISDA), and the Institute of International Finance (IIF) provide comments to the Group of Governors and Heads of Supervision (GHOS), Basel Committee on Banking Supervision (BCBS), and Bank for International Settlements to highlight key areas of the Fundamental Review of the Trading Book (FRTB) framework that require further consideration in order to ensure a balanced and more robust market risk capital framework and prevent negative impacts on the market broader economy.
The International Swaps and Derivatives Association (ISDA), the Global Financial Markets Association (GFMA) and the International Institute of Finance (IIF) set out in this document their key findings from the analysis of the results that 28 banks1 submitted to the Basel Committee on Banking Supervision’s (BCBS) Quantitative Impact Study (QIS) on the Fundamental Review of the Trading Book (FRTB) with June 2015 reference data (henceforth “QIS analysis”). The objective of this initiative was to investigate the aggregate impact of the proposed FRTB framework and to provide data-driven feedback to the policymakers for further consideration.
The Basel QIS submissions for the 28 globally / locally significant banks were combined to generate comparative metrics for an “Aggregate Bank”. The quantitative analysis was complemented by qualitative reviews, including a survey of banks’ confidence in their interpretation of the QIS instructions and of the estimates that they submitted. We believe this supplementary qualitative information provides useful context for the estimates of an industry-wide impact of the current FRTB proposals.
GFMA, the International Swaps and Derivatives Association (ISDA) and the Institute of International Finance (IIF) provide comment to the Basel Committee on Banking Supervision (BCBS) and the Group of Governors and Heads of Supervision (GHOS) requesting that the timeline for finalizing the fundamental review of the trading book (FRTB) be reconsidered in order to assess changes to key components of the FRTB since the third consultation document. The additional time will allow adequate assessment of impact on products and markets to ensure that this is aligned with the overall public policy goals.
GFMA and the Financial Industry Association (FIA) respond to the Agency for the Cooperation of the Energy Regulators (ACER) on ACER's Consultation: Draft Trade Reporting User Manual (TRUM) for trade reporting under The Regulation on Energy Market Integrity and Transparency (REMIT).
In addition to addressing the specific questions in the consultation, the groups take the opportunity to raise some high level points that we feel are important in the wider context of the reporting regime under REMIT.
GFMA, the Institute of International Finance (IIF) the International Swaps and Derivatives Association, Inc (ISDA) provide comments to the Basel Committee on Banking Supervision (BCBS) on the revised Standardized Approach for Market Risk.
The industry believes that the Sensitivity Based Approach (SBA), as put forward by the BCBS, constitutes a significant improvement to the previous version of the methodology and is in line with industry recommendations on leveraging upon existing validated risk metrics to calculate the market risk capital requirements.
The Advanced Cash Flow Approach (ACFA) methodology, on the other hand, is not computationally supported by existing infrastructure, since cash flow data are not captured at the trade level. As a result, industry members would require extensive resources to adhere to currently proposed regulatory timelines whilst achieving little in terms of enhancing the risk sensitivity of output metrics. This would be particularly onerous for smaller organizations.
GFMA Chief Executive Simon Lewis writes to the editors of the Financial Times calling for G20 finance ministers and financial heads of all nations to formally endorse the robust application of the international principle of comity – where the home regulator defers to the host regulator where the latter’s rules are consistent with the G20 recommendations and best practices.
GFMA, the International Swaps and Derivatives Association (ISDA), and the Institute of International Finance (IIF) provides further response to the Basel Committee on Banking Supervision (BCBS) on Consultative Document: Fundamental Review of the Trading Book dated May 2012 (Fundamental Review or FRTB). The groups recommend reading this further response should be read in the context of the previous industry response submitted in September 2012.
Under current BCBS Trading Book Group (TBG) proposals, the organizations feel that the ideas for standard rules may be overly prescriptive and complex because they attempt to achieve too many goals, many of which we feel may be better addressed by considering use of a standardized calibration of internal models for the purpose of benchmarking models and making cross firm comparisons. While the groups would be happy to engage further with the TBG on a recalibration of the existing standard rules approach, or indeed on the design of a new simple standard rules approach, the focus of this response is on standardization of model calibration for benchmarking purposes.
