In March 2026 the Fed, the OCC, and the FDIC jointly proposed a recalibrated capital framework for the Fundamental Review of the Trading Book (FRTB), replacing the contentious 19% capital increase of the 2023 original with a broadly capital-neutral approach. For trading desks and market risk teams, the implications are immediate and significant.
What Changed and What Did Not
The headline change is the removal of the "dual stack" framework. Under the 2023 original, banks would have had to run capital calculations under both the Standardized Approach and internal models simultaneously. Dropping that requirement cuts a major operational burden. More broadly, the proposal recalibrates market risk requirements to better reflect actual risk, addressing industry concerns that the 2023 framework disproportionately penalized diversified trading books and Treasury holdings.
The proposal also encourages the use of internal models, in two ways. First, it relaxes how Non-Modelable Risk Factors (NMRFs) are qualified. A risk factor is now non-modelable only if it has fewer than 24 price observations in a rolling one-year window, versus 100 under the Basel original, and NMRFs are split into Type A (lighter capital) and Type B (original Stressed Expected Shortfall treatment). This incentivizes banks to consider the Internal Model Approach (IMA) for more exotic books and desks. Second, PLAT has been simplified. The Spearman method is dropped and the Kolmogorov-Smirnov (KS) test is non-binding for three years, addressing concerns that PLAT mishandled cross-desk hedges.
What has not changed is the fundamental structure of FRTB. The Sensitivities-Based Method, the Default Risk Charge, Expected Shortfall under IMA, and the P&L Attribution Tests remain the structural pillars of market risk capital. Banks that have been building toward FRTB compliance are not starting over; the investment in those pillars carries through.
The SA/IMA Question
Every bank must implement the Standardized Approach. Now they have to decide whether to pursue IMA approval for some or all trading desks.
The 2023 framework made IMA unattractive for many desks. The approval burden was high, P&L Attribution Tests were demanding, and the capital benefit was uncertain. The recalibrated framework reopens that conversation. One of the more consequential changes in the proposal is the treatment of the SA charge as a cap on IMA capital requirements rather than a parallel calculation. For desks with well-diversified books, this materially changes the IMA cost-benefit analysis.
But this is not a binary choice made once. It is an ongoing optimization across a live book, across desks with different risk profiles, under rules that are still being finalized. The analytical infrastructure to run that evaluation continuously, with full auditability, is not something that can be assembled in the final months before implementation.
A Fragmented Global Picture
The US proposal does not exist in isolation. The global picture is one of deliberate and potentially lasting regulatory divergence.
The EU has pushed FRTB implementation back to January 2027, citing competitive parity concerns with the US and UK. The EU is also consulting on a temporary multiplier that would neutralize the capital impact of FRTB on trading activities for up to three years. The UK's Prudential Regulation Authority (PRA) has finalized its Basel 3.1 package for January 2027 but deferred the FRTB IMA to January 2028, recognizing the complexity for cross-border firms.
For banks operating across multiple jurisdictions, this means running parallel implementations against different parameter sets, different timelines, and different political constraints in each region. The risk of building jurisdiction-specific silos, rather than a single flexible platform that absorbs rule changes as they are finalized, is a real and growing operational concern.
The Endgame
Comments on the March 2026 proposal are due June 18, 2026. Final rules are expected in Q4 2026, with implementation targeted for 2027. That is a short window for institutions to assess what the recalibrated parameters mean for their specific book, to stress-test their SA/IMA assumptions, and to ensure their infrastructure can handle the next round of changes.
Banks that can rapidly model the capital impact of regulatory change, explain the drivers at desk and instrument level, and support the sign-off workflows between calculation and regulatory submission will be better positioned than those still relying on fragmented tooling and manual processes.
The Endgame has just entered its most important phase.
ActiveViam's Atoti FRTB is in production at leading banks across the US, Europe, and Asia, supporting real-time capital calculation, impact analysis, and regulatory reporting under both SA and IMA. To understand how Atoti FRTB can help your institution navigate the proposal, contact us.
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