The Basel Committee’s oversight body, the Group of Central Bank Governors and Heads of Supervision (GHOS), has endorsed the new market risk framework. The new risk framework, which takes effect in 2019, includes:

  • a revised boundary between the banking and trading books that will reduce scope for arbitrage;
  • a revised internal models approach with more coherent and comprehensive risk capture;
  • an enhanced model approval process and more prudent recognition of hedging and portfolio diversification; and
  • a revised standardised approach that serves as a credible fall-back and floor to the model-based approach, and facilitates more consistent and comparable reporting of market risk across banks and jurisdictions.

GHOS also agreed that the Committee would complete its work to address the problem of excessive variability in risk-weighted assets by the end of 2016. (Source: Market Risk Framework and Work Programme for Basel Committee Endorsed)