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

Global Trading in INR Derivatives

Global trading in derivatives involving the Indian rupee (INR) has expanded significantly over the past decade, reflecting the currency’s growing role in international hedging and trading activity. According to the Bank for International Settlements (BIS) Triennial Central Bank Survey, the...

Response to FCA on Commodity Derivatives Clearing

On April 9, ISDA, the Commodity Markets Council Europe (CMCE), Energy Traders Europe (ETE) and FIA jointly responded to Chapter 7 of the UK Financial Conduct Authority’s (FCA) Quarterly Consultation CP26/8 on increasing the clearing threshold for commodity derivatives under the UK...

Response on EC’s SFR Proposal

On April 9, ISDA published technical comments on the European Commission’s (EC) proposed Settlement Finality Regulation (SFR) as it applies to designated EU systems and registered third-country systems. One significant concern is that the scope of insolvency protections provided to...