Regulatory Alerts2011-10-18
Allocation of Positions to the Trading Book
The Norwegian Financial Supervisory Authority issued Circular 27/2011 to address the incorrect allocation of excessive exposures to the trading book by securities firms, which distorts compliance with large exposure limits and concentration risk assessments. The circular clarifies that positions must be held with a genuine 'trading intent'—specifically for short-term resale or to profit from price variations—to qualify for the trading book, excluding standard client broking activities. It further mandates strict internal governance, including documented trading strategies, independent daily valuation, and robust oversight procedures to ensure accurate risk management and regulatory compliance.
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