Reshaping of the IRRBB risk measurement framework

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The client is the French subsidiary of a pan-African banking conglomerate, with banking operations in 36 African countries. It is the leading independent regional banking group in West Africa and Central Africa, serving wholesale and retail customers.

THE CHALLENGE

In the context of a database migration, a need was identified to review and improve processes related to interest rate risk measurement and monitoring in line with the latest regulatory requirements. More specifically, there was a need to redefine the calculation methodology and underlying data for IRRBB metrics and to implemented a more automated process for IRRBB reporting.

APPROACH AND SOLUTION

The different assumptions and calculation methodologies were assessed against the requirements of the latest IRRBB regulatory requirements, with any gaps being identified and analysed. In order to close these gaps in the the IRRBBB production process, Avantage Reply supported the client with the following:

Design and mapping of the data base
Identification of all key methodologies assumptions to design and implement the key IRRBB measures to be included in the new framework
Enhancement of the calculation model, dashboard and visualisation tools
Definition and formalisation of associated policies, procedures and governance processes

RESULTS AND BENEFITS

The IRRBB measurement process was completely reshaped and adapted in line with regulatory expectations, but also to provide appropriate simulations and specific analysis for risk management purposes. In addition to this, both governance and control mechanisms were enhanced, with new policies, procedures and governance processes being develop and formalised.

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