The Basel Committee has proposed a simplified alternative to the market risk standardised approach. The new approach is a reduced sensitivities-based method (SbM), without capital requirements for vega and curvature risks, with a simpler basis risk calculation and reduced risk factor granularity. It can be used by banks with limited trading risks, subject to supervisory approval and oversight. The proposal is open for consultation until 27 September 2017.
The methodology is an addition to the 2016 standard on Minimum Capital Requirements for Market Risk, the so-called Fundamental Review of the Trading Book (FRTB). The FRTB sets new international rules for the internal models approach and the standardised approach for market risk capital requirements.
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