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MSCI comments on the Basel Committee for Banking Supervision Second Consultative Document - Fundamental Review of the Trading Book

In October 2013, the Basel Committee on Banking Supervision published its second consultative document on their Fundamental Review of the Trading Book. This document contains a more detailed version of the revised market risk approach introduced in May 2012, reflecting the Committee’s further analysis as well as industry comments on the first consultative document. In our comments, we focus on the interpretation of the new internal model guidelines, and set out a number of examples to begin to evaluate the behavior of what appears to be a significant new modeling paradigm. We remark on a few simple portfolios, and raise the question of whether the incentives induced by the new model are foreseen and desirable.

The full comments are available on the Bank for International Settlements's website as well.

Read the first round of comments here.