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FRTB Programme: Focus On Documentation

Most firms with a Trading Book are now pressing ahead with implementing the new Basel Market Risk Rules – still widely known as the Fundamental Review of the Trading Book (FRTB) – and the documentation that goes with it.

But some smaller or medium-sized firms might not have really started yet. Nor might overseas subsidiaries. Or other firms who’ve been outside the scope of Basel’s intensive – and challenging – Quantitative Impact Studies (QIS) in the last three years.

Such firms will soon be planning their implementation. Or need to be. This blog looks to help, by focusing on the references to documentation in the new rules.

At Prism-Clarity we believe in the power of good documentation to highlight wider issues. We don’t believe in doing the documentation piece of a programme as an afterthought, a side-project or an inconvenience. It is and should be central.

By focusing early on the documentary outputs needed under the new rules, you can identify issues, ask good questions about your business, risk, other controls and technology, avoid false paths and potentially save costs.

Work backwards from the documentation to help shape your wider FRTB programme, or verify that your programme is on the right track.

Passporting: What It Is And Why It Matters

Passporting is top of the list of many UK financial firms’ concerns post-Brexit.

“Will we keep our passporting rights as part of any negotiated deal relating to single market access when the UK leaves the EU?”

What does this mean? Why is it such a problem if UK firms lose their rights to “passport” into Europe? What are the alternatives and why are they so unpalatable?

And what is a realistic scenario given the different “trade models” that are possible examples for the UK post-Brexit (Norway, Switzerland and others)?

This blog tries to shed some light on passporting and why these questions matter.

We also look briefly at different trade models and apply a new metric – the Prism-Clarity “Single Market Access Compatibility” (SMAC) score. This is a judgment-based measure of the extent to which passporting – or something like it – might be possible under different trade models.

BOEPrism

Risk & Regulation Round-up: June to August 2016

A quarterly round-up of key announcements and developments in UK financial risk and regulation: covering 1st June to 26th August 2016.

Links to underlying source stories or documents are contained within individual articles in this blog.

The British EU referendum (‘Brexit’) vote on 23rd June 2016 was the most significant political and economic event in the UK and Europe for many years. So inevitably this bulletin contains some Brexit coverage. We try to avoid speculative treatment and broader political comment, and instead just summarise key announcements and developments relating to risk and regulatory aspects of Brexit.

Against the background of Brexit, the regulators pushed on with their technical agenda in a number of areas during the period. This included MiFID, structural reform (ring-fencing) and various aspects of capital regulation. The new Head of the Financial Conduct Authority warned that Brexit would not give rise to a “bonfire” of existing regulations. In other words regulated firms should expect – at least in the short term – a continuation of existing and proposed supervisory practice irrespective of Brexit.

Still, three themes seem to predominate in the post-Brexit environment for financial services firms:
(1) There will be ongoing uncertainty over both timing and substance.
(2) It is likely there will be some impact on passporting rights, into and out of the remaining EU. This will be covered in a future Prism-Clarity blog.
(3) Firms now have to plan and prepare intensively for a range of uncertain scenarios, while continuing to maintain both BAU and already-known implementations.

The articles in this blog do not constitute advice, but please contact Prism-Clarity for further information, including where to get the best advice.

What Makes A Good Policy: Five Watchwords

This blog is about policy.

Now you might wonder why anyone in their right mind would write about policy. What makes a good policy? Nothing, you might say. Policy is boring, it is irrelevant, it is meaningless, it is dry and it is old-fashioned.

To a point I agree. In the digital age what really is the point of writing out a few tired phrases purporting to be “the way things should be done” to sit in a forgotten corner of the web taking up space and interesting no-one.

Nobody reads it, nobody owns it, nobody updates it, nobody tests compliance against it. It is a hostage to fortune at best, a ticking time bomb at worst. It adds no value, it gives no insight, it does not help. Why bother?

The answer to these valid challenges is: this is the way our policy often is – but not the way it needs to be.