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Fundamental Review of the Trading Book

The new Minimum Capital Requirements for Market Risk (d352) that resulted from the Fundamental Review of the Trading Book (FRTB – BCBS 265) at the start of 2016 have set a high bar for banks’ risk management processes and the infrastructure that supports them. Even the simpler Standardised Approach places major demands on firms in areas such as data quality, firm-wide aggregation and sensitivity calculations. The challenges around the Internal Models Approach have already been widely documented:

  • A substantial increase in processing power and storage requirements,
  • Uncertainties over P&L attribution tests and identification of non-modellable risk factors
  • identification of non-modellable risk factors.

Percentile’s RiskMine Platform

Percentile gives businesses an edge through regulatory compliance. Going beyond the tick box of compliance by providing the tools for Risk Management to be more aligned with the business and help make better risk/reward decisions.

Percentile’s RiskMine software has evolved over more than a decade to keep pace with complex, changing demands from regulators and day-to-day risk management. With RiskMine FRTB, this flexible, scalable approach is applied to the challenges of FRTB – not just meeting today’s requirements, but providing a platform to meet future requirements.

Key Benefits of RisMine FRTB

  • Specifically designed to easily integrate with existing risk infrastructure
  • Consolidated view across multiple desks covering both SA and IMA.
  • Desktop application for real time analysis, Excel for flexibility and dashboard for reporting
  • For Internal Models Approach, integrates directly with Front Office valuations to address P&L Attribution test challenges.

Standardised Approach

Ready to use Standardised Calculator

A calculation engine to produce the capital charge and show intermediate calculations, allocation of buckets and correlations.

Drill into drivers of capital charge

Quickly assess the capital impact and identify the drivers of the capital charge right down to individual portfolios or positions. Easily identify bad reference data and see the effect of changing positions and metadata in real time.

Clearly defined data model and file formats

The input format clearly defines the data needed to calculate the Standardised capital charge. It also provides a clear integration point when consolidating data from disparate systems.

 Detailed and flexible reporting

The results and intermediate calculations are directly accessible for analysis via Excel, and for reporting via interactive dashboards and scheduled reports.

Internal Models Approach

RiskMine Internal Models builds naturally on RiskMine’s proven market data management, scenario generation and distributed pricing – the move to Global Expected Shortfall, with its varying historical date ranges, liquidity horizons and risk class combinations, is simply a matter of configuration.

Market Data Management

RiskMine manages time series to drive scenario generation for historical simulations and stress testing, providing:

  • Time series importers: available for many vendors (Bloomberg,
    Reuters etc) and types of data (equity prices, volatility surfaces,
    credit curves etc), with a simple API to import other data.
  • A graphical application: to view and edit time series, with a
    powerful exception search facility. This gives you flexible tools
    to find and flag time series, eg non-modellable risk factors, factors
    that don’t span the full FRTB date range or simply bad data.

Drill into drivers of capital charge

Quickly assess the capital impact and identify the drivers of the capital charge right down to individual portfolios or positions. Easily identify bad reference data and see the effect of changing positions and metadata in real time.

  • IMA Historical VaR/ES
  • SA sensitivities
  • Historical and hypothetical stress scenarios
  • Any other “shock-based” risk measures

Development of new risk models stops being a barrier to trading new products – once the analytics are in place in the Front Office, they are available for risk.

Firmwide Aggregation

The Global Expected Shortfall results are loaded into RiskMine’s Cube, which calculates the top level capital charge on the fly and allows you to drill down to individual positions and P&L strips and see the effect of removing books and positions.

This is then available through the native Excel interface, interactive dashboards and scheduled reports.

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