As banks limit FRTB model use, outputs get more volatile
Risk managers say selection of stress window becomes more sensitive if fewer desks are on IMA
In a bid to make new market risk capital requirements more manageable, growing numbers of investment banks are opting to cut their use of internal models. But they have now discovered a fresh downside to that approach: it increases the volatility of capital requirements for the desks that still use the internal model approaches (IMA).
A senior risk modeller at a European bank says last year’s crises in markets such as energy and rates have left those desks still deploying IMA “a little bit
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