Capitalization of Equity Investments in Funds Under the FRTB

On January 10, 2022, ISDA published a whitepaper, Capitalization of Equity Investment in Funds Under the FRTB Framework.

Funds perform a key role in the economy, and banks play an important part in facilitating indirect investments in funds for their clients, offering structured investment and hedging solutions and providing an effective and liquid market. However, the treatment of equity investments in funds (EIIFs) under the Fundamental Review of the Trading Book is very conservative and may unduly increase the cost of providing fund investment solutions.

This paper outlines the various regulatory prescribed methodologies and the operational challenges faced by banks in implementing them. The paper also explores vendor solutions and proposes alternative methods for calculating capital requirements for EIIFs.

Documents (1) for Capitalization of Equity Investments in Funds Under the FRTB

ISDA AGM Studio: Jacques Vigner, BNP Paribas

Jacques Vigner, ISDA board member and chief strategic oversight officer for global markets at BNP Paribas, speaks with Mark Gheerbrant, global head of risk and capital at ISDA, on the key obstacles to a consistent, risk-appropriate capital framework and how to...

ISDA AGM Studio: Future Leaders in Derivatives

Following publication of the latest whitepaper from the ISDA Future Leaders in Derivatives (IFLD) program, Collateral and Liquidity Efficiency in the Derivatives Market: Navigating Risk in a Fragile Ecosystem, Joel Clark talks to IFLD participants Koen Ottenheijm, senior treasury and...