Fundamental Review of the Trading Book

Over the last few years, the Basel Committee has made a number of specific changes to the regulatory rules for the trading book, focusing mainly on internal models based RWA calculations.


As a result of the Fundamental Review of the Trading Book (FRTB), the regulatory focus has shifted even more towards market risk topics. The European version of the FRTB was published last year as part of the CRR II draft finalising the significant changes to the market risk rules and the definition of the trading book. Many topics are part of the changes - e.g. the redefinition of the boundary between the trading and banking books, the replacement of value-at-risk by expected shortfall, and recognition of market liquidity risk. All banks will be affected by these changes and are facing rigorous and extensive preparations. Timelines are not yet fixed and conceptual issues like P&L attribution are still in discussion, but banks using internal models have to prepare their FRTB applications now in order to meet regulatory deadlines.


Learn more about the new boundary and the relationship between standardized approach and internal model.


With more than 20 years of experience in market risk projects, our market overview and in-depth knowledge of regulatory processes we support our clients with

  • Impact studies
  • Project planning
  • Design, implementation and testing
  • Support of the regulatory approval process for internal models

We take into account all aspects of the FRTB - as well as the specific requirements of your trading strategy, risk management and IT infrastructure. In our projects we cover:

  • Analysis of critical positions in your current trading and banking books subject to a potential re-designation due to the new rules
  • Set-up of processes for compliance with the new standards for internal risk transfers
  • Calculation of the new capital requirements according to the standardized approach using d-fine’s SA-TB tool - for Basel III monitoring, as prototype and for the validation of your implementation
  • Migration of current VaR and IRC models to ES and DRC models
  • Integration of varying liquidity horizons for risk factors and non-modellable risk factors into the calculation of capital charges
  • Validation of the internal model including extended backtesting and P&L attribution
  • Planning and support of the approval process for the new internal model: from preparation of the application package to ongoing support of the communication with regulators
  • Support on decisions regarding functional and technical architecture as well as system selection processes


Benefit from our experience gleaned through numerous trading book projects. We look forward to hearing from you.


To receive detailed information on our trading book references, on our approach to the topic of the "Fundamental Review of the Trading Book", and on how we can support you, please call us on +44 20 7776 1000 (UK), on +49 69 907370 (DE) or email us at, with the subject line "Fundamental Review".

Click here for further information on our consulting services in the area of market risk.