The Fundamental Review of the Trading Book and Emerging Markets
In January 2019, the final piece of Basel III fell into place with the publication of the revised framework for market risk capital, known as the Fundamental Review of the Trading Book (FRTB).
The FRTB makes a number of important changes, including the introduction of a more risk-sensitive standardized approach (SA), desk-level approval for internal models, and a capital add-on for non-modellable risk factors (NMRFs).
With the rules now finalized, attention turns to national implementation, but there are uncertainties about how the rules will be transposed, and whether all jurisdictions will meet the Basel Committee on Banking Supervision’s (BCBS) 2022 implementation target.
For banks in emerging markets, implementation poses some particular challenges. These include barriers to entry, a shortage of data and concerns about the treatment of sovereign debt. While it is important for the framework to be implemented as consistently as possible, it is also imperative that regulators and market participants monitor and understand the impact on emerging market banks and economies.
Click on the PDF below to read the full report.
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