Kishore Ramakrishnan is Managing Director, Regulatory Change Management for Treliant’s Capital Markets practice. He has over 20 years of global industry and consulting experience across the banking, capital markets, asset, and wealth management businesses. Kishore is a trusted advisor and respected thought leader in the risk, regulation, and compliance domains…
Letter to firms ‘Fundamental Review of the Trading Book (FRTB): Timetable for submission of internal model/standard approach pre-applications’
- Source: bankofengland.co.uk
Treliant can help design and implement the end-to-end FRTB operating model including conducting regulatory gap analysis, rule mapping, and supervisory model approval submissions for internal models alongside providing program governance and program management support.
Bank of England (BoE) announced that it will consult on the UK implementation of Basel 3.1, including FRTB, in Q4-2022, with a planned implementation date of Wednesday 1 January 2025.
The Basel 3.1 framework removes the existing IMA methodologies, replacing them with a completely new framework.
Since the FRTB framework is quite different from the existing VaR based IMA approach, current IMA firms would automatically move to the new standardized approach (SA) when the new rules implemented until they are granted the FRTB IMA permissions.
BoE expect firms to submit final IMA pre-application materials at least 12 months in advance , i.e. by Monday 1 January 2024.
Planned schedule of reviews, which covers the main new features of FRTB-IMA, is:
- Q4-2022 – Default Risk Charge (DRC)
- Q1-2023 – Risk factor eligibility test (RFET)
- Q2-2023 – Non-modellable risk factors (NMRF)
- Q3-2023 – P&L attribution test (PLAT) and back-testing
Given the larger number of firms that will use SA, BoE would expect firms to submit any related pre-application materials at least 12 months in advance of UK implementation, in order to allow sufficient time for these to be reviewed.