IHS Markit and Oliver Wyman have teamed up to develop a “comprehensive methodology” for banks to determine risk under the new Fundamental Review of the Trading Book (FRTB) standards.

The new methodology, which will be developed within Markit’s existing FRTB solution, is being designed to reduce the need for analysis work by banks and mitigate the possibility of penalties under new FRTB rules.

“Modellability of risk factors is among banks’ top concerns when it comes to FRTB,” says Yaacov Mutnikas, executive Vice President of Financial Market Technologies at IHS Markit. “By providing a validated methodology that addresses this issue, we are giving banks the confidence that they are classifying risk factors correctly. With Oliver Wyman’s support, we are expecting to produce the first round of results early next year showing which elements of the risk factor universe are modellable and which are not.”

Barrie Wilkinson, Co-Head of Finance and Risk Practice for EMEA at Oliver Wyman, adds: “We will support IHS Markit with the development of the methodologies underlying the modellability mapping and bucketing procedures of Markit’s RFU and together we will refine them with the partner banks.

“This is a very timely development and a great example of how banks can work together with infrastructure providers to better manage costs.”

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by Alex Hamilton
Alex is Senior Reporter at IBS Intelligence, follow him on Twitter or contact him at: alexanderh@ibsintelligence.com