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GFMA, the International Swaps and Derivatives Association (ISDA), and the Institute of International Finance (IIF) provides further response to the Basel Committee on Banking Supervision (BCBS) on Consultative Document: Fundamental Review of the Trading Book dated May 2012 (Fundamental Review or FRTB). The groups recommend reading this further response should be read in the context of the previous industry response submitted in September 2012.
Under current BCBS Trading Book Group (TBG) proposals, the organizations feel that the ideas for standard rules may be overly prescriptive and complex because they attempt to achieve too many goals, many of which we feel may be better addressed by considering use of a standardized calibration of internal models for the purpose of benchmarking models and making cross firm comparisons. While the groups would be happy to engage further with the TBG on a recalibration of the existing standard rules approach, or indeed on the design of a new simple standard rules approach, the focus of this response is on standardization of model calibration for benchmarking purposes.