Independent audits drive compliance in FRTB data solutions

The EU and the Basel Committee have established rigorous standards for independent audits of data vendors, ensuring the validity and integrity of real price observations data critical for FRTB compliance. This data is essential for banks using the internal models approach (IMA) to meet risk factor eligibility test (RFET) rules, minimizing non-modellable risk factors (NMRFs) and reducing capital requirements.

Fausto Marseglia, Head of FRTB Product Management at LSEG, highlights the EU’s stricter stance: “While the Basel Committee requires external audits for pricing data, the EU mandates audits covering governance and processes, ensuring robust systems for FRTB/RFET compliance.”

Independent audits are vital for banks relying on vendor data to pass the RFET, as non-compliant data can lead to punitive capital charges. LSEG’s comprehensive audit process, completed in 2024, positions it as a trusted provider of audited FRTB solutions, helping banks meet looming 2026 deadlines.

Why this matters:

• Audits ensure data validity, reducing NMRFs and capital costs.
• EU regulations are more stringent, requiring governance and process audits.
• Early adoption of audited solutions is crucial to avoid operational disruptions.

Read more about how LSEG’s audited FRTB solutions can help your bank achieve compliance and reduce capital requirements