IFRS 9 Control Framework

FOCUS ON: Case studies,

The customer is a retail belgian bank focusing on mortgage loans and consumer credit. Following the implementation of the IFRS 9 ECL calculator, the need arised to implement a control framework to ensure timely and quality calculation and bookings, and integration in the accounting and reporting platforms. Avantage Reply helped the client bridge the distance between different departments to identify the right responsibilities at the right moment in the process to increase its reliability.

CUSTOMERS GOALS

The objective of the project was to :

Set up controls on the IFRS 9 process : especially on the input part, a shared paltform for Risk, ALM and accounting under the principle of One Data Source.
Embed the controls in the organisation of Bpost Bank, including process desctiption, the definition of roles, Raci matrixes and a management cockpit.
Leverage on the previous work perfomed on the models by another firm, the recommendations of the auditors, and of the regulators

THE CHALLENGE

The first big issue was an organizational one: defining responsibilities for data that are received from an external provider, and that are re-used and shared across different departments. The two other main issues were linked to the project: the control framework was to be set up on a “TO BE” architecture, including changes linked to the new definition of default project that were not stabilized yet, making for a “moving target” situation. Finally, the project was delivered in the context of the Covid-19 lockdown, which limited our access to client network and resources.

APPROACH AND SOLUTION

The solution proposed by Reply was in three phases:

Collection of the controls, quality criteria and common pitfalls
Control framework definition, quality assurance
Implementation and roll-out, embedding in the existing tools

CUSTOMER DESCRIPTION

The customer is a retail belgian bank focusing on mortgage loans and consumer credit.It serves over half a million clients. Our customer offers the various services of a traditional bank: the banking account, savings books, consumer loans, mortgage loans and credit insurance.

RELATED CONTENTS

Case Study

IRRBB – Support the transition of the IRRBB metrics computation tool and reconciliation exercise between both outcomes regarding EVE (Economics Value of Equity) and NII (Net Interest Income).

The Client, a huge international bank, request the support of Avantage Reply to further understand and quantify the differences arising between both of their IRRBB metrics calculators. The first, is a hand-made tool provided by the headquarter and the second is a well-known risk software solution used locally. Avantage Reply helps isolating and assessing each of the differences, and in case of materiality, set processes in order to compute overlays. Avantage Reply further helps to add and validate missing products. Validations cover parametrization of the tool, alinement of IRRBB inputs (margin and reference rate) and models (non-maturing products, prepayment, caps, floors,..)

Case Study

Internal Liquidity Adequacy Assessment Process (ILAAP)

Belgian retail bank under the direct supervision of the European Central Bank (ECB). The Bank’s products and services are distributed on-line, through the network of offices in Belgium, and through brokers. The Bank requested Avantage Reply to enhance their Internal Liquidity Adequacy Assessment Process (ILAAP), not only complying with regulatory requirements but also going beyond them to meet supervisory expectations and align to best practices of the market. Therefore, from Avantage Reply we assist in the performance of the official document that will need to be submitted to the supervisory authority. This assignment is not only writing a document, but also looking into the market and new regulations published by the supervisory authorities, analyzing how other banks are facing the new challenges concerning liquidity and sharing our knowledge and experience of the financial industry.