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Practical implementation of FRTB workshop

Led by Rita Gnutti, Head of Internal Model Market and Counterparty Risk, Intesa Sanpaolo

Friday 7 December 2018

Your workshop leader


Rita Gnutti

Head of Internal Model Market and Counterparty Risk

Intesa Sanpaolo

Rita Rosaria Gnutti is the Head of Market and Counterparty Risk Internal Models in the Risk Management department of Intesa Sanpaolo. Ms. Gnutti has been in the Risk Management function for the last 12 years and is also responsible for the Market and Counterparty Risk Architecture, regulatory reporting for Market and Counterparty Risk and the “Market Data Management Team” who covers scenario generation for internal models.

Your workshop highlights

Overview

This workshop covers the capital requirement framework for market risk in the trading book in light of the new timeline announced by BCBS in Dec 2017 about implementation and reporting date for FRTB.

Starting from the features of the current regulatory framework, it provides an overview of the most relevant methodological, organizational and implementation challenges from a practitioner point of view, taking into account recent regulatory evolutions. Practical evidence is provided on some of the open topics: i.e Non Modellable Risk Factors; changes proposed with  BCBS d436 on PL Attribution, calibration of Standardized Approach; implementation guidelines provided with EBA discussion paper of Dec 2017.

Modules 1 and 2
  • Basel 2.5, SSM TRIM assessment, FRTB timeline update
    This module starts with a short summary of current capital requirements components and gives some insights of areas where the effort allocated by supervisors for TRIM assessment on internal model has a direct link to FRTB requirements. We will look at information about the new regulatory implementation and reporting timeline that has been defined at international level by BCBS, and of high level summary of Basel III reforms that are relevant/linked to FRTB implementation. Moreover, the module provides a high level overview of main pillars of FRTB and of implementation choices that a bank has to decide in light of the uncertainty about the final specification of regulatory requirements.
  • FRTB supervisory and regulatory update
    This module provides explanation of the main features of supervisory and regulatory update regarding:  
    • Implementation details of the FRTB framework that were provided by EBA in December 2017 with DP/2017/04, which provided a very detailed information about implementation of the stress risk measure for Non Modellable Risk Factors, as well as other clarification about the use of Liquidity Horizons in the Expected Shortfall Measure.
    • regulatory update introduced by BCBS with the “revision to the minimum capital requirements for market risk” issued for consultation by BCBS in march 2018, with particular relevant changes relating to the PL Attribution test, the penalty function for computing capital charge based on a “traffic light approach”, calibration of the SBA requirements and some specification about Trading /Banking book boundary and treatment of structural FX risk
Modules 3 and 4
  • Internal Model FRTB practical implementation examples
    This module focus on practical experience. It provides evidence about behaviour of the new internal model capital risk figures compared to current B2,5 figures, and attempts to figure a kind of “reporting” of regulatory data, based on a commonly heard question “which will be – if any – the meaning of use test with FRTB?” We will look at practical implementation of the more stable components of the framework (i.e. the Expected Shortfall “liquidity adjusted”, compared to current VaR + SVaR risk figures). Some examples are also provided about NMRF calculation, based on specification of EBA DP and further updated with BCBS d436 and impacts that may be seen on internal model capital figures.
  • FRTB Standardized Approach improvements and practical implementation examples
    This last module covers the regulatory updates about the standardized approach, introduced with d436 consultation, and provides practical examples of impacts. It also provides a comparison of capital allocation exercises and the behaviour of the standardized approach vs the IMA approach.