The Basel Committee on Banking Supervision (BCBS) has published the Fundamental Review of the Trading Book (FRTB), which lays down detailed guidelines on arriving at the market risk capital requirements. Under the FRTB regime, expected shortfall (ES) will replace value at risk (VaR) to assess market risk. This will limit banks’ freedom to assign instruments between the banking book and the trading, which will increase the regulatory capital requirements.
Achieving FRTB compliance will place huge data demands on banks. Voluminous data will be required to support complex capital calculations and regulatory reporting mandates. To address the FRTB data challenge, banks must embrace Big Data technologies with the following key components: