Ensuring On-going Internal Model Eligibility

FRTB means New Market Risk Frameworks requiring banks to systematically identify, assess and monitor against these frameworks.

This presents significant resource and data challenges. including those listed below:

Market Risk Frameworks
Eligibility Testing
P&L Attribution
Managing Backtesting
Managing Capital
Consistent Data
Standardised & Internal Model Approach

Banks will be required to systematically identify, assess and monitor against these Market Risk Frameworks.

This presents significant resource challenges in developing Quantitative Methodology and meeting the computational demands of FRTB calculations.

Qualifying for IMA

Profit & Loss Attribution Tests, or PLAT (Test 1) and Non-modellable Risk Factors, or NMRF (Test 3) are the most controversial part of the regulation.

Strict testing will be implemented by regulators, including continuous testing of alignment between Front Office and Risk Management to ensure the accurate reporting of Market Risk Capital.

Passing the P&L Attribution Test

The new Profit & Loss Attribution Tests (PLAT) requires revised processes to ensure closer alignment of data between Front Office and Risk Management.

Banks face quantitative challenges requiring Front Office and Risk Management to work together to ensure the alignment of models.

Bank-wide Backtesting at Desk Level

Banks must review existing VaR methodologies and backtesting processes to align with FRTB requirements.

Managing Asymmetric Thresholds

In recognition of the difficulty in passing Eligibility tests, regulators have introduced a traffic light threshold system for failure, requiring banks to implement Threshold controls.

The challenge is that the traffic light thresholds are not evenly distributed.

The Right Data, at the Right Time

Banks need consistent and granular data including revised trades, sensitivities, market data, reference data and more to meet FRTB compliance and successfully pass eligibility tests.

Data Sourcing Service

Our exceptional Data Sourcing service empowers you to overcome these challenges and gives you:

  1. Processes by which to identify, assess and monitor against Market Risk Frameworks
  2. Data and expertise to align Front Office and Risk
  3. Effective processes for creating and building tests
  4. The right data for FRTB compliance (close gaps in your data)