ISDA Paper on FRTB Rules in Brazil

On March 24, ISDA submitted a paper to Banco Central do Brazil’s (BCB) on its implementation of the revised market risk framework under the Fundamental Review of the Trading Book (FRTB), which represents an important step toward strengthening prudential standards and enhancing supervisory comparability.

At the same time, certain jurisdiction specific methodological choices, limited optionality and prescriptive implementation requirements could materially increase operational and technological complexity, particularly for internationally active institutions operating global trading books. While such features may appear limited in isolation, their combined effect can require parallel calculation frameworks, reduce economies of scale and increase operational risk, without delivering commensurate improvements in risk sensitivity or supervisory insight.

This paper identifies specific aspects of the Brazilian FRTB implementation where refinements could support a more effective and sustainable framework. These include the treatment of alternative sensitivities and curvature risk, calendar and tenor conventions, foreign exchange shock calibration and several other technical and drafting issues. The recommendations outlined are intended as targeted adjustments that remain consistent with the Basel framework and international practice and would materially improve international alignment, operational efficiency,# and the ongoing resilience of market risk capital implementation in Brazil.

Documents (1) for ISDA Paper on FRTB Rules in Brazil

Remove Bureaucracy from Cross-margin Approvals

Cross-margining programs play a critical role in financial markets. By ensuring margin requirements more closely reflect the actual risk of a portfolio of products, they reduce liquidity strain and improve market efficiency, both of which will become even more important...

Joint Response on CCP Resolution

On September 7, ISDA and FIA responded to a Bank of England (BOE) discussion paper on central counterparty (CCP) resolution. The associations support greater clarity on valuation capabilities prior to a crisis scenario and the boundary between recovery and resolution,...