ISDA, GFMA & IIF Letter to the Trading Book Group of the Basel Committee on Banking Supervision, providing consolidated industry response to the Second Consultative Document on the Fundamental Review of the Trading Book (FRTB)

This response consolidates prior industry responses (issued successively on Jan 3rd, 6th and 19th, 2014, and listed separately at the ISDA website), by summarizing the main points from previous submissions and interactions,  clarifying some of the industry’s positions, and by including a list of questions regarding securitization for further discussion.  The major concerns of the industry are with the feasibility of the QIS timetable as currently envisioned, the proposed Standardized Approach and the liquidity horizon component of the Internal Model Approach (which pose significant implementation challenges), and the proposed treatment of credit and model-independent approval process.  As such, the letter asks that BCBS consider the industry’s proposals and, if significant revisions in the proposed methodologies were to be undertaken, the industry would greatly appreciate, i) to be informed as soon as possible since significant changes may affect the banks’ ability to participate in the QIS, and ii) the opportunity to comment on such revised proposals.

The responses can be found on ISDA’s Risk Management Page.