The Basel Committee on Banking Supervision (BCBS) published revised minimum capital requirements for market risk, replacing an earlier version of the standard from January 2016 and incorporating changes that were proposed in a March 2018 consultative document. The revised market-risk framework includes the following key changes:

  • a simplified standardised approach (SA) for banks that have small or non-complex trading portfolios;
  • clarifications on which exposures are subject to market-risk capital requirements;
  • refined SA treatments of foreign-exchange (FX) risk and index instruments;
  • revised SA risk weights for general interest rate risk, FX and certain exposures subject to credit-spread risk;
  • revisions to the assessment process to determine whether a bank's internal risk management models appropriately reflect the risks of individual trading desks; and
  • revisions to the requirements for identification of risk factors that are eligible for internal modelling.

The revised market risk framework will take effect as of 1 January 2022, concurrent with the implementation of the Basel III reforms endorsed in December 2017. Once implemented, the revised framework is estimated to result in a weighted average increase of about 22% in total market risk capital requirements relative to the Basel 2.5 framework. By contrast, the framework issued in 2016 would have resulted in a weighted average increase of about 40%. The share of risk-weighted assets (RWAs) attributable to market risk remains low, at around 5% of total RWAs.

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