FRTB Simplified Standardised Approach (SSA)

Eligibility is anchored in CRR III Art. 325a and follows the proportionality logic of the Basel framework. The core criteria: the institution's on- and off-balance-sheet trading book business must remain below the defined size thresholds — below EUR 1 billion and a limited share of total assets — the institution must not be a G-SIB or O-SII, and it must not hold correlation trading portfolios or pursue complex trading strategies for which the simplified approach was not designed. Eligibility is not a one-off gate: institutions must monitor the thresholds on an ongoing basis and demonstrate continued compliance to the supervisor. We conduct a structured eligibility assessment that reviews trading book size, product complexity and risk class structure, and documents the result in a form that stands up to supervisory dialogue.

The SSA dispenses with the full sensitivities-based method of the FRTB standardised approach — no delta, vega and curvature calculations, no correlation scenarios. Instead, capital is calculated using recalibrated versions of the previous standardised market risk approaches, multiplied by supervisory scaling factors per risk class: 1.3 for interest rate risk, 3.5 for equity risk, 1.9 for commodity risk and 1.2 for foreign exchange risk. This drastically reduces data requirements: no sensitivity infrastructure, no bucketing across dozens of risk factor categories, and significantly simpler validation. The trade-off is risk sensitivity — the flat scaling factors do not reward hedging and diversification the way the full SA does. For banks with small, straightforward trading books, however, the operational simplification usually outweighs this drawback.

Not automatically — the decision has two dimensions.

🔍 Implementation and running costs:

🔍 Capital effects:

Threshold breaches are the key operational risk of the SSA. Institutions must monitor the CRR III criteria continuously, and a sustained breach obliges the bank to transition to the full standardised approach — a project that requires sensitivity calculations, new data feeds and adjusted processes, and that cannot be delivered overnight. Prudent SSA users therefore establish three safeguards: first, monthly threshold monitoring with early-warning indicators well below the hard limits; second, governance rules that flag planned business growth or new products against the eligibility criteria before they are launched; and third, a documented contingency plan describing how a migration to the full SA would be executed, with realistic timelines. We set up this monitoring and contingency framework as part of every SSA implementation, so growth decisions never collide unexpectedly with regulatory eligibility.

The EU measures package of November 2025 adjusts the FRTB framework in the EU, and one element is directly relevant for SSA users: the diversification multiplier, previously a relief mechanism within the full standardised approach, is extended to the Simplified Standardised Approach. For institutions using the SSA this is a meaningful improvement, because it softens the main drawback of the approach — the limited recognition of diversification across risk classes — and thereby improves the capital outcome without adding implementation complexity comparable to the full SA. The practical consequence: banks that previously ruled out the SSA on capital grounds should re-run the comparison against the full SA under the updated rules. We update the comparative calculation, verify the correct application of the multiplier and adjust your capital calculation and documentation accordingly.