QIS 3 FAQ: B. Trading book

1. For QIS purposes what exposures should be included in the trading book?

Answer: Although there will be some refinement of the trading book definition under the new Accord, for purposes of QIS 3, banks should continue to use current national rules in defining their trading book exposures.

2. The general market risk charge in cell E109 of the Capital sheet is placed under the heading 'trading book'. I assume, however, that the number to be reported there should also include the market risk capital charge for FX and commodity risk in the banking book.

Answer: You are correct; this cell should include the full general market risk capital charge and should also include market risk capital charges related to the banking book, i.e. the general market risk capital charge as reported according to current regulation.

3. In paragraph 648 of the Technical Guidance, the calculation of specific risk capital charges for positions hedged by credit derivatives is discussed. Is the cross-reference to paragraph 133(g) correct?

Answer: The cross-reference is incorrect. It should refer to paragraph 156(g).

4. In the specific risk section (section c) of the trading book spreadsheets there is a specific risk charge of 4% that appears among the other specific risk charges which is not described in the Technical Guidance. To which securities should the 4% charge be applied?

Answer: The specific risk charges in section c of the spreadsheets apply to debt and equity securities in the trading book as described in the 1996 Amendment to the Capital Accord to Incorporate Market Risks as well as the new charges for government paper discussed in paragraph 643 of the Technical Guidance. Therefore, equity securities meeting certain conditions described in the 1996 Amendment may be eligible for a 4% specific risk charge. Paragraph 643 of the Technical Guidance only discusses changes to the specific risk charges (for government paper). Other applicable specific risk charges are found in the 1996 Amendment.

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