GFMA, the Institute of International Finance (IIF) the International Swaps and Derivatives Association, Inc (ISDA) provide comments to the Basel Committee on Banking Supervision (BCBS) on the revised Standardized Approach for Market Risk.
The industry believes that the Sensitivity Based Approach (SBA), as put forward by the BCBS, constitutes a significant improvement to the previous version of the methodology and is in line with industry recommendations on leveraging upon existing validated risk metrics to calculate the market risk capital requirements.
The Advanced Cash Flow Approach (ACFA) methodology, on the other hand, is not computationally supported by existing infrastructure, since cash flow data are not captured at the trade level. As a result, industry members would require extensive resources to adhere to currently proposed regulatory timelines whilst achieving little in terms of enhancing the risk sensitivity of output metrics. This would be particularly onerous for smaller organizations.