FRTB: Is time still on your side?

In March 2018, based on its observations of banks’ efforts to implement FRTB, the BCBS decided to postpone the deadline for implementation to 2022, acknowledging ‘ongoing challenges related to implementation of the standard’. With more time before implementation, banks now have an opportunity to re-evaluate their implementation plans and consider a more strategic approach that may have not been possible under the previous deadline. For those that intend to implement a more strategic approach, time is limited even with the delayed deadline. Although the date of implementation is 1 January 2022, some key steps must occur before this, including the regulatory approval of models, which requires models to be run one year in advance of implementation.

With this in mind, Chartis carried out a series of interviews with 15 individuals (including FRTB program leads, heads of risk technology, and data/analytics team members) from one national regulatory agency and 11 banks (including global universal banks, banks with an investment focus, and retail-oriented banks). The institutions interviewed are located in Europe and North America, and are a mix of global, Tier 1 and Tier 2 organizations. We asked them about their plans regarding FRTB implementation, including:

  • Any changes to their approach since the implementation deadline was extended.
  • Their intentions regarding the IMA versus the SA.
  • Their view on the practicality of assessing the capital impact of FRTB implementation decisions.
  • Their plans for sourcing data and using proxy data.
  • Their thoughts on outsourcing their FRTB technology requirements.

Based on these interviews, and analysis provided by Chartis, this report aims to provide:

  • Insight into how banks plan to comply with FRTB.
  • A realistic view of the way that banks have responded to the extension of FRTB’s implementation deadline.
  • An assessment of the real impact that FRTB is likely to have, and its implications for banks and their technology and service providers.