New modular solution and data sets address NMRFs and P&L attribution
“FRTB will potentially have a dramatic impact on banks’ trading operations,” said Yaacov Mutnikas, managing director and cohead of Solutions at Markit. “Most banks will be challenged to produce the data sets necessary to demonstrate modellability and to manage and validate proxy decisions under new NMRF guidelines. The solution leverages our core strengths across capital modelling, transaction processing and data aggregation to help solve these issues. Markit’s capital impact research indicates our aggregated transaction data can result in a 40% reduction in capital requirements compared to banks using only their own data1.”
The solution, which is designed to leverage a bank’s existing infrastructure, will be comprised of four modular, integrated components:
FRTB standards require access to comprehensive transaction data for use in Non Modellable Risk Factor (NMRF) assessment. Markit captures a large percentage of OTC derivative transactions through MarkitSERV, which processes interest rate, credit, equity and FX derivatives on a global basis. Markit is working with the banks to utilise and supplement this data to demonstrate modellability across all asset classes.
Effective management of risk factors will be critical for FRTB compliance. Markit’s approach focuses on increasing the ease with which banks can manage risk factors, delivering significant advantages in impact analysis, model approval and capital management. Using the latest advances in technology architecture, Markit provides a scalable solution that can keep up with the added volume and complexity of calculations under FRTB, which comes into force in 2019.
1Recent Markit research on the impact of improved data on capital and NMRFs under the new standards
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