Fundamental Review of the Trading Book (FRTB) Implementation

This programme addresses the comprehensive overhaul of market risk regulation under FRTB, providing practical guidance for SME banks with trading operations. The course covers the boundary between trading and banking book, revised standardised approaches, and internal model requirements. Participants will understand the significant increase in market risk capital requirements and develop strategies for managing these changes whilst maintaining trading capabilities.

Given that most SME banks will utilise standardised approaches rather than internal models, the programme emphasises practical implementation of the Simplified Standardised Approach (SSA) and Standardised Approach (SA), with particular focus on instruments commonly held by SME banks.

Participants will:

• Master the revised trading book boundary definitions and classification requirements
• Implement Simplified Standardised Approach and Standardised Approach calculations
• Understand the impact of FRTB on capital requirements and business strategy
• Develop effective market risk governance under FRTB requirements
• Navigate practical challenges in FRTB implementation for SME banks
• Optimise trading book structure within FRTB constraints

• FRTB Overview and Rationale
  • Lessons from the financial crisis
  • Key changes from Basel 2.5 to FRTB
  • Implementation timeline and regulatory expectations

• Trading Book Boundary
  • Revised presumptive lists and classification criteria
  • Trading intent and business model considerations
  • Documentation and governance requirements
  • Regular review and reclassification processes
• Standardised Approaches
  • Simplified Standardised Approach: scope and calculation
  • Standardised Approach: sensitivities-based method
  • Default risk charge calculation
  • Residual risk add-on
• Implementation Considerations
  • Systems and data requirements
  • P&L attribution and back-testing requirements
  • Business strategy implications
  • Cost-benefit analysis of different approaches