The client is a former subsidiary of one of the largest UK banking groups and has recently undergone a change of ownership. The client’s activities cover retail banking, wealth management and insurance.
Following the acquisition of the bank by a new shareholder, the Prudential Control and Resolution Authority (‘ACPR’) conducted an in-depth assessment of the bank’s strategic, financial and risk profiles. In this context, the regulator challenged the bank on its capital and liquidity capabilities and requested them to implement their first Internal Capital Adequacy Assessment Process (ICAAP) and Internal Liquidity Adequacy Assessment Process (ILAAP). In this context, Avantage Reply was engaged to design, implement and steer these 2 strategic processes.
APPROACH AND SOLUTION
Our approach consisted of assessing the client’s current abilities to develop and implement both ICAAP and ILAAP processes. To do so, three steps were conducted, including (i) a gap analysis on key identified blocks, (ii) an action plan to design and implement both processes, and (iii) the full implementation of both overall frameworks. In practice, the first phase consisted of an in-depth analysis of the business model and internal governance, the existing risk profile, methodologies and risk management tools. This allowed the Avantage Reply team to draw conclusions and identify area of improvement for methodological, operational and governance components of the Bank’s capital and liquidity management frameworks. Subsequent to this, action plans were defined for both ICAAP and ILAAP frameworks in line with supervisory expectations and market practices. To complete the project, implementation phase work
For the ICAAP, the process was structured around the below:
For the ILAAP, the process was structured around the below
Further to the above, Avantage Reply provided subject matter expertise on the following key topics:
RESULTS AND BENEFITS
The client was able to demonstrate and present the system implemented in-house to monitor and control the level of its risks in relation to the adequacy of its internal capital and liquidity, its financial structure and its prudential environment.