Market Risk Analytics: Where Are We Now?

In recent years, regulatory bodies and industry practitioners have increasingly emphasised the role of sound market risk management frameworks and strong internal controls. This greater emphasis reflects the view that properly managing risk has been critical to the conduct of safe and profitable banking activities, and has become even more important in the aftermath of the global financial crisis that exposed severe vulnerabilities in market risk management frameworks across the industry.

This report, based on a survey of 31 major banks, explores the current state of market risk analytics across the banking sector. It looks at the progress being made in the implementation of new market risk frameworks and infrastructure and the key challenges facing banks in facilitating these capabilities. The analysis covers the following areas:
- Calculation of market risk metrics;
- Development of market risk systems and infrastructure;
- Market risk stress testing;
- Challenges in market risk analytics frameworks; and
- Budgets.