EU Legislators Delay FRTB Capital Requirements, Reporting Charges Remain

EU legislators have agreed to strip out revamped capital charges for market risk from the Fundamental Review of the Trading Book (FRTB) legislation, introducing only a reporting requirement initially. According to a source speaking for Risk.net, the three EU legislative bodies – the European Commission, Council of the EU and European Parliament – have reached “a provisional agreement on the approach,” essentially introducing stricter reporting requirements for financial firms before the capital requirements of the FRTB become legally binding. This follows previous delays in the implementation. In December 2017, the Basel Committee – the author of the review – postponed enforcement of the FRTB from 2019 to 2022. Then, in March 2018, Basel announced revisions to key parts of the FRTB, which are now expected to be completed in January 2019. This announcement, midway through the EU’s transposing of the FRTB into a set of laws known as the capital requirements regulation (CRR). EU legislators risked implementing an outdated version of the FRTB or introducing new rules that were still under consideration at Basel and lacked a full impact assessment. Now, the capital requirements have been dropped from the revised version of the CRR. However, the legislation will still bring into force new regulatory requirements, which will require banks to Improve the accuracy of their risk calculations and the consistency of data between front office, trading and risk operations. This transition, for many banks, has either driven or coincides with a larger-scale revamp of their IT infrastructures. In terms of FRTB, the deadlines for such restructures has not changed.