Stellungnahme DK zum BCBS Consultative document "Fundamental review of the trading book”
The financial market crisis clearly exposed the weaknesses inherent in the models-based regulatory approach towards market risks (“Basel 1.5”) in effect at the time. Whilst reforms (“Basel 2.5”) which were initialised already prior to the outbreak of the financial market crisis and came into effect in Europe on 31 December 2011 have indeed led to clearly higher capital requirements for the trading book, these reforms took place under a lot of time pressure. Hence, these reforms themselves feature weaknesses or were not able to remedy shortcomings that were already known. Criticism has primarily been levelled at coherence or, moreover consistency of the market risk framework, the adequacy and completeness of market risk measurement as well as scope for regulatory cherry picking in combination with the unchanged boundary between trading book and banking book.
Based on the foregoing, we would like to express our basic support for the Basel Committee’s deliberations to overcome the weaknesses inherent in the regulatory framework (“Basel 2.5”). In our view the proposals which are as yet expressed in a not elaborated language have extremely far-reaching consequences for the future capital requirements for market risks both under the standardised approach and also under the models-based approach. Under the present proposals, the approaches currently applicable to market risk should undergo comprehensive adjustments which would entail material changes in the infrastructure for both the internal models-based approach as well as for the application of the standardized approach. Also, banks’ internal organisational structures will be substantially affected by the changes. The new rules under the models-based approach will render the interpretation of the new market risk measures as well as the derivation of management action far more demanding and complex. Furthermore, it is our understanding that due to the adjustments in the existing approaches, the implementation costs and input of resources will be extremely high. We therefore kindly ask that this will be adequately reflected in the deadlines granted to banks for the introduction of these new rules. […]