Internal Audit of an ICLAAP

SUMMARY
The client, a major banking group, engaged Avantage Reply to support the internal audit department in its review of the ICAAP/ILAAP documents. The objective was to evaluate the adequacy of these frameworks to ensure compliance with regulatory guidelines. This involved assessing governance, risk management practices, stress testing methodologies, and the overall alignment of ICAAP and ILAAP with the regulatory expectations. 

CUSTOMER GOALS
The Bank’s main goal was to ensure alignment with regulatory expectations, assess the effectiveness of risk identification and stress testing, and verify that the governance, processes, and controls supporting ICAAP and ILAAP were robust.

To address the client’s needs and evaluate its compliance, Avantage Reply conducted a detailed gap analysis to assess the alignment of the Bank’s ICAAP and ILAAP processes with the requirements outlined in:

• Circular CSSF 07/301 - Implementation of the Internal Capital and Liquidity Adequacy Assessment Process (ICAAP/ILAAP) 
• Circular CSSF 11/506 - Principles of a sound stress testing programme
• EBA/GL/2016/10 - Guidelines on ICAAP and ILAAP information collected for SREP purposes
• Circular CSSF 12/552 - Central administration, internal governance and risk management

CHALLENGES
The main challenges were ensuring collaboration and access to information, and reviewing documentation consistency.

SOLUTION
Avantage provided the audit team who compiled an internal audit memo detailing all observations and providing enhancement recommendations. After delivering the final report, meetings were held with key stakeholders to provide a detailed explanation of the identified gaps and their potential impacts. 

CUSTOMER DESCRIPTION
An internationally significant institution providing a full range of banking services, including wealth management and solutions for large corporations, financial institutions, corporate foundations, and associations.