Numerix is launching its FRTB solution aimed at helping banks meet the challenges of the Fundamental Review of the Trading Book (FRTB).
The solution aims to help banks assess FRTB's impact on capital requirements both at the desk-level as well as for the bank as a whole.
FRTB changes the way banks are required to calculate risk. Prescribed by the Basel Committee, it asks banks to determine risk over stressed periods of time using either the Internal Model Approach (IMA) or the Standardized Approach (SA). It also replaces the use of value-at-risk with expected shortfall. FRTB will be implemented beginning January 2020, though testing should begin in 2019.
Numerix chief executive officer Steve O'Hanlon said the solution provides Software-as-a-Service (SaaS) model to comply with FRTB and assist with strategic decision-making in the early stages.
"FRTB is a game changer that demands a fundamental shift in the ways banks function and manage risk. But at this point the market is exhausted about hearing about the myriad of challenges and sifting through half-baked vendor solutions," said O'Hanlon in a statement. "Time is running out on discussions and strategizing ─ and for those banks on the path to a broader enterprise-wide technology transformation, FRTB is the catalyst to take action now."
Numerix first announced its intention to address FRTB challenges in March when it released its Oneview analytics and enterprise risk management platform. The solution is intended to help bridge the gap between the front office and the middle office, which is a piece of FRTB that requires the same risk calculations for both sides. Numerix FRTB is a standalone solution from Oneview.
The firm said Numerix FRTB enables banks to assess their business lines and asset classes to see which are profitable and which are not so that the losers can be restructured or discontinued. Numerix FRTB is cloud-based and has functionalities to run IMA and SA calculations. It can be integrated into existing bank infrastructures, according to the vendor. It also says that daily capital calculations can be completed in minutes rather than hours thanks to its SaaS delivery model.
Central to the solution, the firm said, are its vectorized pricing that allows banks to run "80 times speed-up over normal code guaranteeing maximum performance." Users can also import their own market data into the workflow. It offers a centralized approach to manage profit-and-loss attribution so changes from one day to the next can be examined.
O'Hanlon noted the Numerix FRTB solution is designed to be flexible as every institution is thinking about FRTB in different ways and are at varying levels of readiness.
"No matter where a firm is in the process to meet the effective, go-live date for use of an FRTB IMA production environment, technology decisions need to be made in early 2017 in order to have a solution implemented, tested and in place for the rigorous 12-month accreditation process," he said.