EU banks take conservative approach to calculate market risk
As the EU’s fundamental review of the trading book (FRTB) 2025 implementation deadline nears, banks are adopting a conservative market risk stance under the Basel III framework. Many lenders are opting for the standardised approach (SA) to calculate their capital requirements, avoiding the more complex and resource-intensive internal model approach (IMA), even if the SA leads to a higher capital charge. Data from the European Banking Authority’s (EBA) second Basel III monitoring report, published in September, suggests the proportion of the largest Tier 1 banks using internal models will drop to 54%...