Among the many challenges relating to climate risk management is the question of identifying
and assessing exposure to Carbon risk. Indeed, Carbon risk could affect a wide range of
physical assets and businesses.
The European Market Infrastructure Regulation (EMIR) introduced initial margin requirements (IMR) for uncleared over-the-counter (OTC) derivatives, which constitutes the last piece of a series of measures aimed at reducing counterparty credit risk and systemic risk within the derivative markets.
Leveraging on its experience and in line with market practices, Avantage Reply has developed Solvency & Liquidity Stress Test self-assessments tools. Interactive and practical, these self-assessment tools cover the key building blocks of Solvency & Liquidity Stress test frameworks and provide an overview that will help benchmark the internal approaches in relation to supervisory expectations and market best practices.
The European Banking Authority (hereafter “EBA”) introduced a consultation paper on the 1st of March 2021 regarding draft Implementing Technical Standard (hereafter ITS) for disclosures on Environmental, Social and Governance (hereafter “ESG”), and climate change related risks.
The client requested Avantage Reply’s assistance with the review and validation of their monitoring tool (i.e. Monitoring Scorecard). This tool aimed to standardise, centralise and implement a common control mechanism to the monitoring activities related to the general mandate universe. In the course of the project, Avantage Reply applied its expertise in model validation and worked in close liaison with the team who developed the monitoring tool in order to ensure the comprehensiveness of the tool validation and to analyse a possible extension of the application of this tool to other mandates.
Earlier this year, the ECB published the results of the 2020 Supervisory Review and Evaluation Process (SREP) after following a pragmatic approach towards the implementation of its annual exercise to reflect economic uncertainties caused by the Covid-19 pandemic. In this briefing note, we contextualise the 2020 SREP results against the previous five years and identify key areas of impact due to Covid-19.
Wind-Down Planning remains high on the agenda of the Financial Conduct Authority (FCA). The first part of this paper describes the WDP in more detail, summarising its purpose, differences to other regulatory requirements, and what information should a plan include for it to be compliant. The following section lays out practical considerations on the four key themes that firms should scrutinise when improving their WDP.
A UK challenger bank, providing a range of services to both individuals and business clients, engaged Avantage Reply to assist with the preparation for the Recovery Plan Fire Drill exercise, in line with the Prudential Regulation Authority’s (PRA) expectations and to provide independent feedback on the exercise conducted.
In February 2021, the Bank of England (BoE) published its plan for transforming data collection from the UK financial sector. Learn more about the BoE’s vision, key proposed reforms, the transformation programme timeline, and how Avantage Reply can help businesses along this journey.
Leveraging on its experience and in line with market practices, Avantage Reply has developed a Capital planning tool. Flexible and easy to use, it provides financial institutions with a tactical tool which allows them to easily perform capital simulations under different scenarios and integrate key outcomes into capital management and decision-making processes.
The PRA has previously expressed concerns regarding potential errors stemming from the internal model estimation process within credit risk, calling for Margin of Conservatism (MoC) to cover for possible underestimation. We have summarised the approach explored by the EBA to account for this possible underestimation.
Avantage Reply supported a UK subsidiary of an Asian G-SIB that provides services to both retail and corporate customers to ensure all of its financial risks associated with climate change are identified and managed appropriately across its businesses.
Avantage Reply assisted a UK subsidiary of an Asian G-SIB with an independent review of its stress-testing methodology for financial risks arising from climate change.
In Credit Risk management, it is common practice for banks to use financials for assessing the creditworthiness of large and mid-corporates, with the drawback of being outdated by the time the credit review takes place. This paper proposes the use of real-time transactional data to circumvent this issue. This process can be further improved by setting in place teams dedicated to data management and preparation with the benefit of centralising the information used for other purposes, e.g. modelling, loss collection, monitoring, validation.
Avantage Reply has designed a quantitative model for the assessment of Reputational Risk, traditionally considered as discretionary, subjective and highly prone to interpretation. The Reputational Risk Quantitative Model allows us to overcome the reliance on human sensitivity for risk management. Download our white paper to find out more about the Q-model.
A leading trade association for the UK banking and financial services sector was looking to respond to one of the UK government bodies’ call for evidence on regulatory coordination in respect of recommendations for improving Cost/Benefit Analysis (CBA) by financial-services regulators in the UK. Avantage Reply was able to finalise the policy paper for the client to successfully submit their response to the UK regulator within the required timeframe.
The FRF review is a major opportunity to improve the effectiveness and efficiency of
banking and finance regulation now that the UK can determine its regime according to
its own priorities. In this response to HMT’s first consultation on phase II of the review,
we make detailed proposals for updating the framework under five main headings.
Avantage Reply assisted a UK asset manager that provides services to both retail and institutional clients, in ensuring its operational risk framework and stress testing approach meet the regulatory requirements and are aligned with the industry best practice.
The ECB banking supervision is based on the same rules as local supervision (single rulebook), public information on the differences between both is not commonly available. While there are differences, these are on a practical level and only known to experts with insights on both locally and directly supervised banks. Avantage Reply prepared a review of these differences and the gaps of the client to these the previous year. The client wanted to have an update on these recommendations based on the progress that was made during the year, also with regard to the updated timeline to ECB supervision. To address these topics, Avantage Reply organised workshops with its subject matter experts and the client and reviewed the relevant documents provided by the client.
Avantage Reply assisted a client that was reviewing a potential transaction as part of a strategy to take on selected exposures to second charge mortgages and efficiently deploy its capital resources. As part of its broader review, the client asked Avantage Reply to review their internal materials, identify relevant considerations (primarily from a capital and liquidity perspective) and provide an evaluation of the proposed structure of the transaction.
An EU bank had established a UK subsidiary to continue the activities of their currently passported branch after Brexit. The goal of the project was to assist the client with developing documentation that aligned with internal expectations and regulatory requirements in the UK.
Avantage Reply reviewed the risk management framework documentation for the subsidiary and four key documents for the subsidiary in the UK based on FCA regulation.