BASEL REFORMS

Master the new Basel 3.1 capital requirements for Securities Financing Transactions (SFTs) by understanding the critical interplay between Exposure at Default (EAD), supervisory volatility adjustments, and margin periods of risk. This guide breaks down the regulatory formulas and eligibility criteria, including the impact of material positive correlation on collateral recognition, to help you navigate the upcoming changes.

The Residual Risk Add-on (RRAO) is a component of the Advanced Standardised Approach (ASA) for market risk under the Fundamental Review of the Trading Book (FRTB). The RRAO is intended to be a simple, conservative capital charge that captures risks from instruments not fully covered by the SBM or DRC calculations.

The Default Risk Charge (DRC) for the Alternative Correlation Trading Portfolio (ACTP) is a distinct component of the FRTB framework. Its calculation methodology is unique because it is designed to handle portfolios with both long and short securitisation positions, such as index tranches and their hedges.