Fundamental review of the trading book - second consultative document issued by the Basel Committee

31 October 2013

The Basel Committee on Banking Supervision has today issued a second consultative paper on the fundamental review of capital requirements for the trading book. The paper comprises a detailed set of proposals for a comprehensive revision of the market risk framework. This initiative forms part of the Committee's broader agenda to reform regulatory standards for banks in response to the financial crisis.

The May 2012 consultative paper set out a number of specific measures to improve trading book capital requirements. These initial proposals reflected the Committee's overall objective of designing a new regulatory framework that addresses weaknesses in risk measurement under the current internal models-based and standardised approaches, with a view to promoting consistent implementation across jurisdictions.

This second consultative document provides more detail on the approaches introduced in May 2012, and sets out a draft text for a revised market risk framework. It has been informed by comments received on the first consultative paper, and lessons learnt from the Committee's recent investigations into the variability of market risk-weighted assets.

The key features of the proposed revised framework include:

The Committee is also considering the merits of introducing the standardised approach as a floor or surcharge to the models-based approach. However, it will only make a final decision on this issue following a comprehensive Quantitative Impact Study, after assessing the impact and interactions of the revised standardised and models-based approaches.

Comments on this consultative document should be submitted by Friday 31 January 2014 by e-mail to Alternatively, comments may be sent by post to the Secretariat of the Basel Committee on Banking Supervision, Bank for International Settlements, CH-4002 Basel, Switzerland. All comments will be published on the website of the Bank for International Settlements unless a respondent specifically requests confidential treatment.