In this new Accenture Finance & Risk presentation we explore how the Fundamental Review of Trading Book (FRTB) impacts the Volcker Regime Trading Desk Structure and offer suggestions on how to address. For more information, see our blog series on FRTB and Volcker Regime Trading Desk Structure: https://accntu.re/2pJtd6v

1. HOW THE FUNDAMENTAL REVIEW OF
TRADING BOOK IMPACTS THE VOLCKER
REGIME TRADING DESK STRUCTURE
FINANCE
& RISK

2. EXECUTIVE SUMMARY
IMPACT OF FUNDAMENTAL REVIEW OF
TRADING BOOK (FRTB) ON VOLCKER RULE
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Overview
• The FRTB rules have a major impact on the trading activities of the banks and should be implemented considering other relevant regulations (e.g.,
BCBS239, Volcker, Stress Testing, Credit Value Adjustment framework) which may have an impact on the implementation of FRTB
• Understanding the regulatory impact of FRTB can help banks design a holistic compliance solution; and leverage the existing capabilities developed
as part of other strategic regulatory initiatives elsewhere in the organization
Volcker Trading
Desk
• Under the Volcker Rule, a Trading Desk is defined as “the smallest discreet unit of an organization of a banking entity that purchases or sells
Financial Instruments for the trading account of the banking entity”1
• Trading Desks under the Enhanced Minimum Standards for Programmatic Compliance for example, are required to have: policies and procedures;
internal controls; testing; limits; products (e.g., instruments, strategy, risks, and exposure); defined holding period; authorization procedures;
compensation arrangements; and counterparty definitions
FRTB Trading
Desk
• Under FRTB, a Trading Desk is defined as a “group of traders or trading accounts that implements a well defined business strategy operating within a
clear risk management structure” but subject to regulatory approval of the supervisor for capital purposes
• Trading Desks key attributes for example, are a defined group of traders or trading accounts, clear reporting line to senior management and
compensation policy linked to pre-established objectives, defined business strategy, clear risk management structure, and supervisory reports
(inventory aging, daily limits, intraday limits and respective utilization and breaches, and reports on assessment of market liquidity) and foreign or
commodity positions held in banking book
Volcker and FRTB Areas of Impact and Degree of Change
Trading Desk Structure Trading Account Definition Trading Desk Instruments
Low HighMedium
Foreign
Banking Entity
US Banking
Entity
Low HighMedium Low HighMedium
1 2 3
• Volcker Rule is based on compliance requirements that vary
based on size of banking entity resulting in different levels of
Trading Desk structure which may not align to FRTB Trading
Desk attributes
• The Volcker Rule concept of Trading Account is to identify
transactions subject to the rule, and not a strict boundary for
Trading vs Banking book as found under FRTB
• The Volcker Rule identifies Financial Instruments that are
subject to the rule, while FRTB defines a strict boundary for
the definition of instruments that are to reside in the Trading
Desk
1. “Proprietary trading and certain interest in and relationships with covered funds,” Access at: http://online.wsj.com/public/resources/documents/1210volckerregtext.pdf
Source for all FRTB-specific content: Minimum capital requirements for market risk,” Basel Committee on Banking Supervision. Access at: http://www.bis.org/bcbs/publ/d352.pdf Copyright © 2017 Accenture. All rights reserved.

3. FRTB IMPACT ON VOLCKER RULE
TRADING DESK STRUCTURE
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The Volcker final rules provides compliance requirements that vary based on the size of the banking entity and the activities conducted
which result in varying degrees of Trading Desk requirements
Trading Desk Component Volcker Rule Degree of Change FRTB
Trading Desk Structure
Smallest Discreet
Unit
Aligned to Business
Strategy
• FRTB is a global regulatory regime as opposed to the US centric Volcker rule. Key asset thresholds under Volcker (US Consolidated Assets, Consolidated Assets
and Gross US Trading Assets and Liabilities) govern Foreign Banking Entities and lead to varying degrees of Trading Desk structure against the Volcker Rule
(e.g., desks may lack risk management structure, trading strategies, limit monitoring required under FRTB) while US Banking Entities will primarily be subject to
“Volcker Enhanced Compliance Requirements”
• This may result in a Low - Medium degree of change for US Banking Entities, as Trading Desks are largely subject to Volcker Trading Desk requirements
as part of the Enhanced Minimum Standards for Programmatic Compliance (Volcker Rule Appendix B)
• This may result in a Medium - High degree of change for Foreign Banking Entities, as Trading Desks may not be subject to Volcker Trading Desk
requirements and may need to be re-evaluated and enhanced under the FRTB regime
Use Case Scenario
USBankForeignBank
Low HighMedium
Foreign
Banking Entity
U.S. Banking
Entity
US Banking Entity
US Banking Entities with Gross
Worldwide Trading Assets and
Liabilities of at least $10 BN
Volcker Guidance
Subject to Enhanced
Compliance Requirements1
1. Given the tiered compliance program timeline based on Asset and Liability all US entities with at least $10 BN of Gross
Worldwide Trading Assets and Liabilities will be subject to enhanced compliance by December 2016
2. Volcker Trading Desk Requirements defines specific requirements that must be in place to govern the each Trading Desk
(Volcker Rule Appendix B)
Volcker Trading Desk
Volcker Requirements (e.g.,
Product, Desk Structure,
Strategy, Risk Factors)2
Degree of Change
Low - Medium
Degree of Change
Foreign Banking Entity
Varying degree of compliance
requirements based on
Consolidated and US Trading
Assets and Liabilities1
Volcker Guidance
Banking Entity may be subject to
varying Volcker requirements from
Simplified to Enhanced2
1. Multiple thresholds to determine required compliance program for Foreign Banking Entities i.e., Total US Consolidated Assets
and Gross US Trading Assets and Liabilities as a result Foreign Banking Entities may be subject to varying degrees of
compliance requirements under Volcker
2. Volcker implication depends on size of the banking entity and activities conducted
3. Ibid
Volcker Trading Desk
Requirements range from
guidelines (standard) to
prescriptive (enhanced)3
Medium – High
Degree of Change
FRTB
FRTB Trading Desk
Desk Assessment to align
with FRTB Requirements
FRTB Trading Desk
Desk Assessment to align
with FRTB Requirements
Minor degree of change may be assumed as desks will largely have
the Trading Desk artifacts as required under Volcker, which may
need to be re-calibrated and enhanced under FRTB
Medium - high degree of change as trading desks have to establish
the Trading Desk artifacts required under FRTB. However, desks
may maintain artifacts at various levels.
Source for all FRTB-specific content: Minimum capital requirements for market risk,” Basel Committee on Banking Supervision. Access at: http://www.bis.org/bcbs/publ/d352.pdf Copyright © 2017 Accenture. All rights reserved.
Degree of Change

4. FRTB IMPACT ON VOLCKER RULE
INSTRUMENTS IN SCOPE
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The Volcker Rule identifies Financial Instruments that are subject to the rule, while FRTB defines a strict boundary for the definition
of instruments that are to reside in the Trading Desk
Trading Desk Component Volcker Rule Degree of Change FRTB
Trading Desk Instruments
Instruments subject to
Permitted Activities
Strict Instrument
Boundaries
• Under the FRTB regime, there is a strict boundary to set out guidance on instruments which are to be included in the Trading Book or excluded
from the Trading Book, any deviation from guidance requires supervisory oversight. This represents a significant shift from the Volcker Rule as
there was no clear delineation on classification of instruments other than what would be subject to Volcker monitoring and reporting or excluded
from definition of proprietary trading
• This may result in a Medium-High degree of change as Trading Desk instruments may need to be re-evaluated and enhanced to align with
specific Trading Desks under FRTB and consider capital implications
Use Case Scenario
Volcker Trading Desk Instruments FRTB Trading Desk Instruments
• Financial Instrument:
• Security (including option on a security)
• A derivative (including an option on a derivative)
• A contract of sale of a commodity for future delivery, or option on a contract of a sale
of a commodity for future delivery
• Excluding: Loan, excluded commodity, and foreign exchange
• Instruments comprise Financial Instruments, foreign exchange, and commodities
• Financial Instrument is any contract that gives rise to both a financial asset of one entity and a
financial liability or equity instrument of another entity
• Financial instruments include both primary Financial Instruments (or cash instruments) and
derivative Financial Instruments
• A financial asset is any asset that is cash, the right to receive cash or another financial asset or
a commodity, or an equity instrument
• A financial liability is the contractual obligation to deliver cash or another financial asset or a
commodity
• Commodities also include non-tangible (i.e., non-physical) goods
Low HighMedium
Volcker
Financial
Instruments
Scope of Volcker
identifies
instruments that
are subject to
prohibition on
proprietary trading
Market Making
Underwriting
Risk Mitigating Hedging
Other Permitted Proprietary
Trading Activities
Market Making
Underwriting
Risk Mitigating Hedging
Other Permitted Proprietary
Trading Activities
FRTBFinancial
Instruments
FRTB strictly
defines
instruments that
are required to be
classified in the
Trading Desk
TradingBook
Instruments
Strict DefinitionSubject to Volcker
Source for all FRTB-specific content: Minimum capital requirements for market risk,” Basel Committee on Banking Supervision. Access at: http://www.bis.org/bcbs/publ/d352.pdf Copyright © 2017 Accenture. All rights reserved.

5. FRTB IMPACT ON VOLCKER RULE
RECOMMENDATIONS
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Volcker and FRTB rules will coexist in the near future and banks will need to establish compliance programs to both set of rules.
Having a strategic vision to leverage implementation efforts across programs can help banks stay ahead of the curve and turn these
programs into business advantage
Trading Desk
Structure
Trading Desk
Enhancement
Trading Book
Definition
Desk Level
Disclosure
Desk Level Key
Attributes
Implementation
Synergies
• Trading Desk structure to align with FRTB definition with
potential isolation of desks used specifically for hedging given
Internal Risk Transfers restrictions
• In our view, banks should strive to have a single desk
structure which satisfies both Volcker and FRTB
requirements
• Potential reconfiguration of Trading Desks and trading strategy
may impact the overall business strategy
• Trading desk enhancement if done within the ambit of
allowed activities under Volcker rule, should allow banks
the flexibility to fine tune their trading desks for attaining
improved capitalization
• A revised trading book/banking book boundary with more
explicit requirements for inclusions and exclusions of
instruments and limitations on reclassifications to reduce
potential for regulatory arbitrage
• Volcker rule did not place any restrictions on classification of
instruments, just what instruments and activities were
permitted. In our view, banks should take a hard look at their
trading instruments before classifying them
• Enhanced disclosure requirements require significant
infrastructure changes to support public disclosure of capital
calculations, profit and loss attribution and back testing results
• Banks would need to augment their reporting infrastructure
to be able to report the capital charges and desk
information as required under Volcker and FRTB rules
• Trading Desks may need to be enhanced with key attributes
defined under FRTB (e.g., defined group of traders or trading
accounts, clear reporting lines, compensation policy linked to
objectives, strategy)
• While Volcker rules did not explicitly mandate risk policy
requirements for all sized banks. FRTB rules have strict
governance controls built in which banks will need to codify
and implement internally
Impact Summary Key Recommendation
• Volcker and FRTB are strategic regulatory programs in majority
of banks with overlapping areas of influence
• In our view these regulatory programs should be viewed as
opportunities to drive synergies in both programs to keep
costs and timelines manageable
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Copyright © 2017 Accenture. All rights reserved.

6. THANK YOU
Contact us:
Rahim Inoussa:
Senior Manager, Accenture Finance & Risk
(E): rahim.inoussa@accenture.com
(P): +1 917-452-0293
Gaurav Kapoor:
Manager, Accenture Finance & Risk
(E): gaurav.a.kapoor@accenture.com
(P): + 1 917-452-0508
Raj Usman:
Manager, Accenture Finance & Risk
(E): usman.raj@accenture.com
(P): +1 416-641-3588
To find out more:
Accenture Finance & Risk:
https://www.accenture.com/us-en/financial-services-finance-risk
Accenture Finance & Risk Blogs:
http://financeandriskblog.accenture.com/homepage/
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https://www.linkedin.com/showcase/16183502
https://twitter.com/AccentureFSRisk (@AccentureFSRisk)

7. HOW THE FUNDAMENTAL REVIEW OF TRADING
BOOK IMPACTS THE VOLCKER REGIME
TRADING DESK STRUCTURE
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Disclaimer
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general informational purposes only
and does not take into account the
reader’s specific circumstances, and
may not reflect the most current
developments. Accenture disclaims,
to the fullest extent permitted by
applicable law, any and all liability for
the accuracy and completeness of the
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