FRTB: Defining A Target Operating Model
The Fundamental Review of the Trading Book (FRTB) is still a long way away – January 2022 at the latest estimate. But the time will pass quickly. Banks with trading activities need to be planning towards it now or soon.
This blog is derived from a piece of work I did recently for a potential client. It suggests an approach to defining a Target Operating Model (TOM) for implementing the FRTB.
In truth this will be mainly of interest to banks which have not yet started their FRTB planning. For example subsidiaries, smaller banks, and banks with marginal trading activities but exceeding the de minimis exemptions.
Most large banks are well under way with FRTB implementation, and have been for some time, participating in industry groups, Basel Quantitative Impact Studies (QIS) and routine monitoring, getting buy-in from their business leaders, corporate program leaders and strategic IT planners.
But smaller banks, in my experience, are not. Understandably, they prefer to wait and see. There are no real advantages to being first movers in this initiative, which has already evolved far – though not beyond recognition – since 2012.
With so many uncertainties along the path, including Brexit and the strategic regulatory and policy intentions of the US Administration, being in mid-pack is a smart play.
Still, it is worth having a long-term think ahead about how you might eventually implement these rules if you haven’t already.
*** Note: This blog does not constitute advice, but please contact Prism-Clarity for further information, including where to get the best advice. ***
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