As well as upgrading the market risk capital rules the FRTB will set much higher standards over the governance, management and operation of trading desks.  Desks must be defined in detail with traders assigned to a single desk which must have a designated desk head.  As previously covered the FRTB is prescriptive about what instruments and activities should be part of the trading book and what should not.  Further moving positions from trading book to banking book will be much harder, banks need to document the reason, receive senior management and regulatory approval and then publish the fact and adjust their capital calculations  to prevent any capital benefit.

Using the trading book to hedge banking book risks will still be possible but different risks require different approaches;
1) Equity and Credit risk need an external trade that exactly matches the internal risk transfer trade.
2) Interest rate risk needs the internal risk transfer trade to be dealt by a specific desk set up for that process, this desk can then trade hedges with third parties.
3) FX and Commodity risk will only require an internal risk transfer to a standard trading desk.

Trading book risks cannot be moved to the banking book for regulatory capital purposes.

The EU published a proposal to amend the existing CRR rules to meet the new BCBS standard in November 2016.  Here is an analysis of the governance, position transfer and risk transfer provisions, comparing the existing EU rules with the BCBS standard and EU’s proposal.  As one would expect the proposal follows the BCBS standard very closely and at this stage the EU does not seem to be intending to “gold plate” or add any extra rules.