Revisions to the minimum capital requirements for market risk

Basel Committee on Banking Supervision Consultative Document Revisions to the minimum capital requirements for market risk Issued for comment by 20 June 2018 March 2018 The final version of this standard was published in January 2019. https://www.bis.org/bcbs/publ/d457.pdf This publication is available on the BIS website (www.bis.org). © Bank for International Settlements 2018. All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated. ISBN 978-92-9259-150-2 (online) Revisions to the minimum capital requirements for market risk iii Contents Revisions to the minimum capital requirements for market risk ................................................................................... 1 Introduction ......................................................................................................................................................................................... 1 1. Standardised approach................................................................................................................................................. 1 1.1 Revisions to the treatment of liquid FX pairs....................................................................................................... 2 1.2 Revisions to correlation scenarios ............................................................................................................................ 2 1.3 Revisions to capital requirements for non-linear instruments .................................................................... 3 1.4 Revisions to risk weights .............................................................................................................................................. 4 1.5 Other clarifications ......................................................................................................................................................... 4 2. Internal models approach ........................................................................................................................................... 5 2.1 P&L attribution test ........................................................................................................................................................ 5 2.1.1 PLA test input data ....................................................................................................................................... 5 2.1.2 PLA test metric design ................................................................................................................................ 6 2.1.3 PLA test failure consequences ................................................................................................................. 7 2.1.4 Trading desk requirements ....................................................................................................................... 8 2.2 Non-modellable risk factors ....................................................................................................................................... 8 2.2.1 Process for satisfying modellability requirements and expectations for internal model calibration ......................................................................................................................... 9 2.2.2 Impact of the NMRF framework on seasonal markets ................................................................ 10 2.2.3 Impact of NMRF idiosyncratic equity risk ......................................................................................... 10 3. Scope of market risk capital requirements ......................................................................................................... 11 3.1 Treatment of structural FX positions ..................................................................................................................... 12 3.2 Boundary between the trading book and the banking book ..................................................................... 12 4. Simplified alternative to the standardised approach ..................................................................................... 13 Next steps ........................................................................................................................................................................................... 13 Annex A – Revisions to the standardised approach .......................................................................................................... 15 A.1 Revisions to correlation scenarios .......................................................................................................................... 15 A.2 Revisions to the curvature risk capital requirement ........................................................................................ 15 A.3 Revisions to FX risk factors and curvature risk capital requirement ............................................