Fundamental review of the trading book - interim impact analysis

November 2015

The Basel Committee on Banking Supervision has today published the results of its interim impact analysis of its fundamental review of the trading book. The report assesses the impact of proposed revisions to the market risk framework set out in two consultative documents published in October 2013 and December 2014. Further revisions to the market risk rules have since been made, and the Committee expects to finalise the standard around year-end.

The analysis was based on a sample of 44 banks that provided usable data for the study and assumed that the proposed market risk framework was fully in force as of 31 December 2014. It shows that the change in market risk capital charges would produce a 4.7% increase in the overall Basel III minimum capital requirement. When the bank with the largest value of market risk-weighted assets is excluded from the sample, the change in total market risk capital charges leads to a 2.3% increase in overall Basel III minimum regulatory capital.

Compared with the current market risk framework, the proposed standard would result in a weighted average increase of 74% in aggregate market risk capital. When measured as a simple average, the increase in the total market risk capital requirement is 41%. For the median bank in the same sample, the capital increase is 18%.

Compared with the current internally modelled approaches for market risk, the capital requirement under the proposed internally modelled approaches would result in an increase of 54%. For the median bank, the capital requirement under the proposed internally modelled approaches is 13% higher.

Compared with the current standardised approach for market risk, the capital requirement under the proposed standardised approach is 128% higher. For the median bank, the capital requirement under the proposed standardised approach is 51% higher.