Technology-Driven FRTB Solution For Basel Requirements

Driven by an extensible data dictionary architecture, the FRTB solution delivers market risk calculations to enable compliance with the new Basel IV framework requirements and is one of the first to align with International Swaps and Derivatives Association’s (ISDA) ‘golden source’ calculations.

One Regulation, Two Approaches

According to Basel IV, all organizations will be required to do the full standardized approach (SA) regardless of whether or not they are calculating the internal model approach (IMA). While SA incorporates a sensitivities-based approach (SBA), revisions to IMA focuses on P&L attribution and non-modellable risk factors (NMRF).

Standard Approach

  • Applies a default risk charge (DRC) by capturing jump-to-default risk
  • Includes residual risk add-on (RRAO), capturing non-linear and other complex payoff risks excluded in Basel II
  • Introduces a sensitivities-based approach

Internal Model Approach

  • Focuses on a new profit & loss (P&L) attribution process at the desk level
  • Incorporates expected shortfall, and replaces value-at-risk (VaR) with stressed value-at-risk (SVaR)
  • Introduces new charges for NMRF

Learn more about AxiomSL’s FRTB Solution

AxiomSL’s FRTB Solution And Capital Calculations And Reporting

SA-CCR credit risk solution enables transparent logic and data steps and multi-jurisdictional calculations

Comprehensive FRTB solution delivers:

Integration with modeling tools and/or embedded open-source technologies (R and Python) via IntegratedModelView

References to regulatory articles with transparent logic

Multi-jurisdictional calculations

Complete drilldown and dynamic data lineage for comprehensive audit defense

SA-CCR credit risk solution addresses all SA-CCR and comprehensive set of capital calculations on a single platform.

Transparent | Innovative | Dynamic

Driven by CapitalView, an extensible data dictionary

New and complex calculation functionality including FRTB and SA-CCR alignment

Corroborated against golden source ISDA calculations for FRTB, SA-CCR and CVA

BCBS 239 compliant with automatic, ongoing monitoring of rule changes and updates

Robust architecture handles large data volumes to deliver scalability

Solution Features

Calculations

Regulation changes are monitored on the platform, and FRTB and current standard rules can be run in parallel.

Supports risk-weighted assets (RWA) calculation requirements for SA/ IMA methodologies; enterprise wide model integration is enabled with natively run IntegratedModelView.

Risk Management

Market data management supports evaluation and processing of third-party data, prices, and evidence.

From source to submission, fully auditable adjustment functionality across all stages of the data flow delivers complete drilldown, reducing operational risk.

Data Governance

Flexible sourcing of reference data, hierarchies, business structures, trader mandates, product lists, and pricing optimizes resources.

Ongoing monitoring of the trading book/banking book adjusts calculations and data lineage enables BCBS 239 compliance expectations.

Basel Compliance

BCBS versus local rules comparison, national discretion regulations and rules engine are fully transparent.

Regulation changes are monitored on the platform and the extensible data dictionary architecture ensures consistency of data and logic.

Key Benefits

Scales with lines of business and jurisdictions to optimize processes across global Basel capital requirements

Provides results dashboards with hierarchies for comprehensive scenario analysis and stress testing processes

Deployable on secure RegCloud®, enabling operational efficiencies

Sensitivities-based approach (SBA) calculates delta, vega, and curvature risk charges across several risk classes

Delivers comprehensive reporting capabilities and formats (including XBRL) for internal and external submissions

Powered by new technology - like Spark - ensuring high performance for large data volumes


Related Insights

Important Considerations for FRTB Reporting

How do we know our RWA is aligned with those of our peers for identical sets of sensitivities and exposures?

How do we ensure consistency between FRTB asset classes and multiple asset class potential future exposure (PFE) as required for SA-CCR?

Are we making business decisions based on risk and governance principles or are we reacting to the output floor?

Will we be able to absorb the additional IT / finance / risk and resource burden and what are best practices for optimizing resources?


FRTB Solution

Learn more about AxiomSL’s FRTB Solution

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