FRTB Compliance for a Tier-1 BankIdentifying Non-Modellable Risk Factors
Synechron has been engaged by a Tier-1 bank to help navigate the complicated web of business domains and uncertain timelines to deploy the necessary regulatory framework to comply with Fundamental Review of Trading Book (FRTB). One of the primary obstacles presented by FRTB is the identification of Non-Modellable Risk Factors (NMRF). While our client had made high-level assessments, a more accurate tactical assessment was requested based on actual transaction observations.
Synechron deployed Risk and Architecture SMEs to compile a detailed analysis of the regulation, incorporating understanding of financial products and bank business domains to logically derive FRTB data requirements and communicate these with stakeholders. The Reference Architecture Framework was implemented as an architecture tool to illustrate the impact of FRTB upon the various business processes and domains touched upon by FRTB.
To properly assess NMRF, Synechron documented the full list of risk factors used both in the current Var model and in the RNIV process. A tactical transaction collection process was used for a proof of concept, which were shared in a cross-industry pooling activity. Synechron leveraged its network of contacts for each asset class to collect data against an aggressive timeline. This data required pre-processing to standardize the data format, and remove internal trades and other non-qualifying data. The results led to a broader assessment process across similar risk factors in order to estimate potential impact areas across all risk classes and create an action plan to further risk engineering.
Tactically Assessing NMRF for FRTB Compliance
We provided the following services to deliver success
Target Operating Model
Data Impact Assessment
Risk Factor Optimization
Current State Analysis
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