Sustainable FRTB compliance through continuous monitoring
FRTB Ongoing Compliance
Ongoing adherence to FRTB requirements demands systematic monitoring, regular adjustments, and proactive optimization. We support you in establishing sustainable FRTB compliance.
- ✓Continuous monitoring of FRTB compliance
- ✓Proactive adaptation to regulatory changes
- ✓Optimization of capital efficiency in the trading book
- ✓Reduction of compliance risk through systematic processes
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- Desired business outcomes and ROI
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Ongoing FRTB Compliance: Sustainable Monitoring and Optimisation
Why ADVISORI for FRTB Ongoing Compliance
- Experience from over 15 FRTB projects at German and European banks
- Battle-tested monitoring frameworks for IMA and SA institutions
- Direct experience with ECB Targeted Reviews and BaFin examinations
- Regulatory expertise combined with quantitative modelling competence
⚠
CRR III / FRTB Timeline
The EU has postponed the FRTB market risk requirements to 1 January 2027. IMA institutions must have established complete backtesting, PLAT and NMRF processes by then. Early preparation secures IMA approval and avoids fallback to the standardised approach.
ADVISORI in Numbers
11+
Years of Experience
120+
Employees
520+
Projects
We work with you to develop a systematic approach to ongoing FRTB compliance that ensures both regulatory certainty and operational efficiency.
Our Approach:
Establishing a solid monitoring and governance framework
Implementing automated monitoring and reporting systems
Developing proactive adaptation mechanisms for regulatory changes
Continuous optimization of processes and systems
Regular review and adjustment of the compliance strategy
"FRTB Ongoing Compliance is a continuous process that requires strategic foresight and operational excellence. With our support, banks can not only ensure regulatory certainty but also sustainably optimize their capital efficiency."
Melanie Düring
Head of Risk Management
Our Services
We offer you tailored solutions for your digital transformation
Continuous Model Monitoring
Systematic monitoring and validation of your FRTB risk models to ensure continuous compliance and optimal performance.
- Automated backtesting procedures and performance monitoring
- Regular calibration and adjustment of risk models
- Development of Model Performance Indicators (MPIs)
- Implementation of alert systems for model deviations
Regulatory Change Management
Proactive monitoring and implementation of regulatory changes to ensure continuous FRTB compliance.
- Monitoring of EBA, BCBS, and national regulatory developments
- Impact assessment and gap analysis for regulatory updates
- Development of implementation roadmaps for changes
- Training and change management for affected teams
Our Competencies in Fundamental Review of the Trading Book (FRTB)
Choose the area that fits your requirements
Expected Shortfall Under FRTB – Calculation, Validation and Implementation
Expected Shortfall (ES) is the central risk measure for market risk capital requirements under the Fundamental Review of the Trading Book (FRTB). It replaces Value at Risk and measures the average loss in the tail of the loss distribution — at the 97.5% confidence level over a 250-day stress period. ADVISORI guides banks through implementation: from ES calculation through classification of modellable risk factors to regulatory validation.
FRTB Backtesting Requirements — Model Validation Standards for Market Risk
FRTB Backtesting Requirements demand precise implementation of Basel III model validation with specific backtesting performance requirements and validation procedures. As a leading consulting firm, we develop tailored RegTech solutions for intelligent backtesting compliance, automated model performance monitoring, and strategic validation optimization with full IP protection.
FRTB Boundary Trading Banking Book
The correct delineation between the trading book and banking book is critical for FRTB compliance and capital optimization. Together with you, we develop solid boundary management frameworks for precise classification and efficient management.
FRTB Credit Valuation Adjustment
FRTB Credit Valuation Adjustment presents new challenges for capital calculation and risk management. Together with you, we develop comprehensive CVA frameworks for precise capital calculation, effective hedging, and sustainable compliance excellence.
FRTB Data Management
The Fundamental Review of the Trading Book demands comprehensive market data, demonstrable risk factor modellability and audit-proof data governance. We build the data infrastructure your trading book needs — from real price observation pipelines and NMRF minimisation to automated data quality assurance.
FRTB German Implementation
The Fundamental Review of the Trading Book presents German banks with specific challenges. We develop tailored implementation strategies that meet BaFin requirements while accounting for the particularities of the German banking market.
FRTB Implementation
Navigate the complex implementation of the Fundamental Review of the Trading Book with our comprehensive implementation support. We guide you through the entire process – from the initial assessment and gap analysis through concept development and system adaptation to full integration into your trading and risk management systems, including model adjustment, data infrastructure and process optimisation.
FRTB Implementation Strategy: Approach Selection, Capital Optimization & Phased Rollout
FRTB Implementation Strategy requires precise implementation of the Basel III Fundamental Review of the Trading Book with specific market risk capital requirements and supervisory validation. As a leading AI consultancy, we develop tailored RegTech solutions for intelligent FRTB compliance, automated trading book separation and strategic market risk optimization with full IP protection.
FRTB Internal Models Approach (IMA) — Requirements, Approval and Implementation
The FRTB Internal Models Approach (IMA) allows banks to use their own risk models for market risk capital calculations — provided they meet strict supervisory requirements for Expected Shortfall, backtesting and P&L attribution. As specialist FRTB consultants, ADVISORI supports institutions with IMA approval, model validation and ongoing compliance.
FRTB Market Risk Modeling – Sensitivity-Based Approach, Risk Classes & Risk Factor Modeling
The Fundamental Review of the Trading Book requires fundamentally new market risk modeling: The sensitivity-based approach (SbA) calculates delta, vega and curvature risks across seven risk classes – GIRR, CSR (non-sec, sec CTP, sec non-CTP), equity, FX and commodity. We support banks in the methodological design, risk factor modeling and operational implementation of these requirements.
FRTB Non-Modellable Risk Factors (NMRF) – RPO Test & SES Capital Add-On | ADVISORI
FRTB Non-Modellable Risk Factors require precise implementation of Basel III NMRF identification with specific capital calculation procedures and stress scenario calibration. As a leading AI consultancy, we develop tailored RegTech solutions for intelligent NMRF compliance, automated risk factor validation and strategic supervisory recognition optimization with full IP protection.
FRTB P&L Attribution Test (PLAT) – Requirements, Methodology & Consulting | ADVISORI
FRTB Profit & Loss Attribution requires precise implementation of Basel III P&L allocation with specific risk factor decomposition requirements and model validation. As a leading AI consultancy, we develop tailored RegTech solutions for intelligent P&L attribution compliance, automated backtesting integration and strategic transparency optimisation with full IP protection.
FRTB Readiness Assessment
Our comprehensive FRTB readiness assessment identifies gaps in your current systems, processes, and data, quantifies the impact on your capital, and delivers a tailored implementation roadmap for efficient FRTB compliance.
Frequently Asked Questions about FRTB Ongoing Compliance
What does ongoing FRTB compliance under CRR III involve?
Ongoing FRTB compliance under CRR III involves daily backtesting of expected shortfall models per Art. 325bf, regular P&L attribution tests (PLAT) to validate internal models, NMRF monitoring for non-modellable risk factors, and ongoing desk-level approval processes. Additionally, it includes regulatory change management for new EBA guidelines, national supervisory circulars and BCBS papers. IMA institutions must have these processes fully established by
1 January 2027.
How does daily FRTB backtesting work?
Daily FRTB backtesting compares predicted risk values (VaR and expected shortfall) with actual trading results. Results are classified using the Basel traffic light system: green zone (0–4 exceptions), yellow zone (5–9 exceptions) and red zone (
10 or more exceptions over
250 trading days). Exceeding thresholds may result in capital add-ons or loss of IMA approval for the affected trading desk.
What happens if a bank fails ongoing FRTB requirements?
Failure to meet ongoing FRTB requirements can lead to several consequences: the affected trading desk may lose IMA approval and must fall back to the less capital-efficient standardised approach (SA). Supervisory authorities can impose capital add-ons, initiate supervisory measures, or increase examination intensity. Additionally, deficiencies in the P&L attribution test or backtesting can trigger a reassessment of the entire model approval by the ECB.
What is the P&L attribution test (PLAT) in the FRTB context?
The P&L attribution test (PLAT) examines whether the internal risk model sufficiently accurately explains the actual profit and loss of the trading desk. It compares the hypothetical P&L (based on the risk model) with the actual P&L. The PLAT uses two metrics: the Spearman correlation coefficient and the Kolmogorov-Smirnov test statistic. Trading desks that fail the PLAT must switch to the standardised approach.
What are non-modellable risk factors (NMRF) and how are they monitored?
Non-modellable risk factors (NMRF) are risk factors for which insufficient real market data exists to reliably model them internally. CRR III requires NMRFs to be separately identified, assessed and capitalised using stress scenarios. Ongoing monitoring includes regular review of data quality and availability, reclassification of risk factors when data conditions change, and calculation of separate capital requirements for NMRFs.
How does ongoing compliance differ between IMA and SA institutions?
IMA institutions (Internal Model Approach) have significantly more extensive ongoing obligations: daily backtesting, quarterly PLAT execution, NMRF monitoring and desk-level approval procedures. SA institutions (Standardised Approach) primarily need to ensure correct application of prescribed risk weights, implement regulatory changes and keep their sensitivity calculations current. Both approaches require regulatory change management when new EBA or supervisory directives are issued.
Which regulatory sources must be monitored for ongoing FRTB compliance?
For ongoing FRTB compliance, the following sources must be systematically monitored: CRR III (particularly Part
3 Title IV Chapters 1a-1b), EBA Regulatory Technical Standards and Guidelines on market risk calculation, the EBA Q&A database for interpretation questions, national supervisory circulars and guidance notes, BCBS papers (particularly d
457 and subsequent revisions), and ECB publications on TRIM and Targeted Reviews of Internal Models.
Success Stories
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Our clients trust our expertise in digital transformation, compliance, and risk management
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