The FRTB: Impact, Implications and Implementation - Risk Books
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The FRTB: Concepts, Implications and Implementation

By Sanjay Sharma & John Beckwith


Reforms known as the Fundamental Review of the Trading Book (FRTB) impact every bank with a trading book which in today's world, is virtually every bank.

The FRTB, released by the Basel Committee on Banking Supervision (BCBS) in 2016, revised the minimum capital requirements for market risk to address the shortcomings of the Basel III market risk capital framework. The FRTB is an overarching view of how risks from banks' trading activities and portfolios should be assessed and quantified through a credible relationship with capital requirements.

How banks plan for the effects, consequences and applications of FRTB is at the heart of Sanjay Sharma and John Beckwith's new book, The FRTB: Concepts, Implications, and Implementation. The book explores the regulations and their consequences and takes a look at the principal components of the new guidelines, which include:

> A boundary between banking and trading books

> Replacing value-at-risk (VaR) with expected shortfall (ES) as a risk measure

> A revised sensitivity-based standardised approach (SA)

> A revised ES-based internal models approach (IMA) with differentiated liquidity horizons.

The FRTB: Impact, Implications, and Implementation is essential reading if you are a practitioner, a consultant, a regulator, an auditor, a ratings agency, an investor, a capital markets participant or a bank stakeholder.

Publish date: 18 Jul 2018

Availability: In stock


Book description

The BCBS' principal objectives for the FRTB are to:

> Achieve consistency across jurisdictions


> Have its SA serve as a credible fall-back and a floor for the IMA

> Address existing weaknesses in the IMA - with the overarching motivation of not significantly increasing bank capital requirements.

This book guides the reader towards efficient FRTB implementation, capital measurement and deployment and, most importantly, effective risk management. The FRTB: Concepts, Implications, and Implementation provides a practical overview of the regulatory guidelines and their implications, and what needs to be achieved in terms of implementation.

Book details

Publish date
18 Jul 2018
230mm x 280mm

Author biography

Sanjay Sharma & John Beckwith

Sanjay Sharma is the founder and chairman of GreenPoint Global, a risk advisory, education and technology services firm headquartered in New York. Founded in 2006, GreenPoint has over 380 employees with a global footprint and production and management teams located in the US, India and Israel. Between 2007 and 2016 Sanjay was the chief risk officer of Global Arbitrage and Trading Group and managing director in fixed income and currencies risk management at RBC Capital Markets in New York. His career in the financial services industry spans over two decades, during which he has held investment banking and risk management positions at Goldman Sachs, Merrill Lynch, Citigroup, Moody’s and Natixis.

Sanjay was the co-founder of the RBC/Hass Fellowship Program at the University of California at Berkeley and is an adjunct professor at EDHEC, Nice, in France, New York University’s Tandon School of Financial Engineering and at Fordham University, where he teaches a capstone course on FRTB implementation for their master’s programmes. He has also served as an advisor and a member of the board of directors of UPS Capital, and on the global board of directors for Professional Risk Managers’ International Association.

Sanjay is a frequent speaker at industry conferences and at universities, and is the author of Risk Transparency, published by Risk Books, as well as numerous papers. He holds a PhD in finance and international business from New York University and an MBA from the Wharton School of Business, and has undergraduate degrees in physics and marine engineering. Sanjay acquired his appreciation for risk first hand as a merchant marine officer at sea, where he served for seven years and received the chief engineer’s certificate of competency for ocean-going merchant ships.

John “Jeb” Beckwith is managing director and head of financial institutions at GreenPoint Financial. As leader of their financial intuitions practice, he heads GreenPoint’s development initiatives and clients engagements in providing regulatory, legal and technology solutions to global financial institutions. Jeb was managing director at RBC Capital Markets in 2004, where led several businesses as Head of Americas, Global Financial Institutions, and as founder/chair of the global industry operating committee adjudicating all bank and sovereign risks. A seasoned banking executive with over 30 years’ experience in the management of risk, capital markets, lending and transaction banking practices, he founded Cooper Beckwith, LLC to advise financial institutions on coming regulatory implementation and joined GreenPoint Global in 2016.

Prior to RBC, Jeb held various management and corporate banking positions with increasing levels of responsibility at MUFG, Bank of America and BNY-Mellon. He is an adjunct professor and NYU’s Tandon School of Financial Engineering, where he serves as co-professor of a capstone course on FRTB implementation for their master’s programme, and an adjunct professor for Fordham University, where he is co-professor for a similar capstone course on FRTB implementation.

Table of contents

1. Overview and Impact

2. The Boundary Between Trading and Banking Books Under FRTB

3. Moving from Value-at-risk to Expected Shortfall

4. The Standardised Approach

5. The Internal Models Approach

6. Default Risk Charge: Standardised and Internal Models Approaches

7. P&L Attribution and Backtesting

8. Regulating and Managing Non-modellable Risk Factors

9. Impact of a Capital Floor

10. Managing Regulatory Trading Desk Frameworks

11. Implementation of FRTB Framework

12. Model Frameworks and Management

13. Regulatory Responsibilities and Supervisory Framework

14. FRTB January 2017 FAQ Response and Review


Securities clearing, trading and liquidity continues to be impacted by evolving bank regulation across the globe, and FRTB is at the center of that. This book promises to be the most comprehensive manual for banks implementing FRTB and should be a great resource for buy- and sell-side market participants in all jurisdictions for years to come. My former colleagues, Sanjay and Jeb, are leading practitioners of market-risk management, from quantitative model frameworks and data alignment to governance and implementation planning. More importantly, both have operated through the practicalities, pressures and politics of project implementation within a large bank framework and bring that experience to bear in this book. They not only understand the practical implications and nuances of FRTB implementation but also know what created the need for it in the first place. They bring experience to this book that only comes from having operated through the 2008 global financial crisis.

Mark Standish, Former Co-CEO, RBC Capital Markets

The FRTB: Concepts, Implications and Implementation should become the ultimate reference and the road map to the risk community involved in a successful implementation of FRTB. It covers all the complex aspects of FRTB in a clear, comprehensive and accessible manner. It is also a detailed implementation guide with useful discussions of the pitfalls to avoid and answers to a broad range of technical issues.

Michel Crouhy, Head of Research & Development, Natixis

Although memories of the 2008 financial crisis are fading, many of the drivers and failures of that systemic event remain embedded in the global financial system. FRTB represents one of the most significant regulatory responses to the crisis from global bank supervisors. It also presents a fundamentally new way to think about measuring and managing trading risk. This comprehensive book on FRTB will be an authoritative reference for years to come.

Morten Friis, Member of Board of Directors, RBS

The FRTB is the most important change to bank capital requirements in a generation, yet its complexity makes it difficult for even the most sophisticated of practitioners to implement. Seemingly minor technical provisions can have significant implications for corporate organisation. The FRTB: Concepts, Implications and Implementation is an indispensable guide for any firm covered by this rule, whether it intends to implement the standard approach, or the more daunting internal models approach. It is technical enough for risk quants yet it lays out important decision points in ways that general managers can understand.

Adam Litke, Former Chief Risk Strategist and Head of Enterprise Risk Services, Bloomberg, L.P.

In this book Sanjay and John provide the industry with a comprehensive book that brings together all the various strands of this important regulatory initiative.

Gary Dunn, Managing Partner, Gary Dunn Consulting

This classroom-tested manifesto is the first in print to tackle Fundamental Review of the Trading Book (FRTB). The authors have been very kind to share their insights with our Masters students and now with the broader financial community. I know that our Masters students thoroughly enjoyed their review of this fundamental trade book (RFTB).

Peter Carr, Dept Chair of Finance and Risk Engineering, NYU Tandon School. 

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