Lynn Strongin Dodds gives an update on the latest chapter in the Fundamental Trading Review Book implementation saga.
The European Commission had already pushed the deadline back for the Fundamental Trading Review Book (FTRB) by one year to 1 January 2026 but many financial institutions think more time is needed to get ready, according to a recent paper – the European Commission Targeted Consultation on the Application of the Market Risk Prudential Framework conducted by the Institute of International Financial (IIF) and the International Swaps and Derivatives Association (ISDA).
The paper covered industry response to the consultation launched by the Commission at the end of March. The rules had been postponed last year to prevent large lenders from being disadvantaged if the US scaled back regulation for their Wall Street rivals.
The Commission wanted to sound out the banking industry on its proposed three options for the FTRB. These included keeping the status quo, postponing the rules by one more year to align with the UK’s 2027 timeline, or apply a set of targeted amendments for a three-year period. This will result in the full implementation of FTRB either on January 1, 2029, or January 1, 2030, depending on the adoption of Option 2.
The IIF and ISDA paper found that a “clear majority” or 21 of the 32 global banks polled favoured an additional one-year delay in Europe to incorporate the FTRB, which covers wholesale banking activities such as stricter separation of positions between the trading and banking book, the introduction of a new standardised approach for market price risks as well as revised regulations on the use of internal models.
The trade groups said that there was though “a minority of the respondents” in the survey who favoured sticking with the current plans “to avoid continued operational complexities.”
The FTRB is part of the wider package of rules dubbed the Basel endgame which is the last phase of the post global financial crisis regulation designed to bolster the financial ecosystem. They were originally slated to be phased in from 2022, but jurisdictions have moved at their own pace. For example, the UK has delayed implementation three times while the Swiss, Canadians and Japanese are fully compliant.
The EU introduced most of the Basel endgame rules earlier this year but opted to postpone the trading book elements because it wanted to be aligned with the US. It had become clear last year that the country would not be able to meet its self-imposed deadline of July 2025 because of dissension within the banking ranks over the more stringent obligations. The Federal Reserve last September responded to the intense lobbying by announcing it intended to reduce Tier 1 capital requirements for US globally systemically important banks to a 9% from the 19% initially proposed in 2023.
Fast forward to today and there are expectations that the requirements may be further watered down or abandoned altogether by the Trump administration. Deregulation was high on his campaign agenda and this was confirmed by a February 2025 executive order that provided greater centralisation and oversight of independent agencies’ regulatory activities within the executive office of the President. This could be seen as potentially affecting the future trajectory of US capital standards.
ISDA Chief Executive Officer Scott O’Malia summed it up for many in his commentary that said the FRTB is currently due to be implemented in the EU from January 1, 2026, but that’s a year earlier than the current deadline in the UK and there is no clarity at this stage on when US policymakers will finalise and implement the rules.
