What is FRTB?

FRTB stands for Fundamental Review of the Trading Book. It is a set of regulatory capital requirements developed by the Basel Committee on Banking Supervision for market risk. FRTB fundamentally overhauls the way banks calculate the capital they must hold against potential losses from their trading activities, aiming for a more risk-sensitive and consistent approach. It introduces new methodologies for determining the boundary between the trading book and the banking book, as well as revised approaches for calculating market risk capital, including standardized and internal model approaches. FRTB impacts banks globally and has been implemented or is in the process of being implemented in many jurisdictions.