ISDA Chief Executive Officer Scott O’Malia published a derivatiViews commentary setting out the association’s priorities for 2026, with the “effective completion” of Basel III reforms framed as a top agenda item and the Fundamental Review of the Trading Book (FRTB) identified as a focal point for ensuring capital requirements remain proportionate and consistently implemented across jurisdictions. The note highlights growing divergence in the final Basel III components. In the US, regulators are revising the Basel III endgame proposal after industry feedback, with a new proposal expected in the coming months. In the EU and the UK, FRTB implementation is due at the start of 2027, while the UK Prudential Regulation Authority has proposed delaying the rollout of internal models until the following year. The European Commission has also launched a targeted consultation on short-term FRTB relief, including temporary amendments to both the standardized and internal models approaches and a multiplier that could cap market risk capital increases for negatively affected banks for three years. ISDA argues temporary measures should not substitute for longer-term solutions, and reiterates recommendations to improve incentives for internal models by recalibrating elements such as the profit-and-loss attribution test, the risk factor eligibility test and non-modellable risk factors, noting an ISDA survey finding that only 10 of 26 banks planned to use internal models for a reduced scope of trading desks under the FRTB. ISDA is working with members to respond to the European Commission consultation and expects further detail via a revised US Basel III endgame proposal in the coming months, while continuing engagement as the EU, UK and US finalize their FRTB-related rules.
ISDA 2025-11-26
ISDA calls for long-term recalibration of Basel III FRTB to keep trading book capital risk-sensitive
ISDA CEO Scott O’Malia outlined 2026 priorities, emphasizing Basel III reforms and the Fundamental Review of the Trading Book (FRTB) for proportional capital requirements. The note addresses regulatory divergences, with the US revising its Basel III proposal, the EU and UK planning FRTB implementation in 2027, and the European Commission consulting on short-term FRTB relief, while ISDA advocates for long-term solutions and improved incentives for internal models.