Publications

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Briefing Note

Carbon Asset Risk Assessment Framework

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.

Briefing Note

Initial Margin Requirements Phases 5 & 6

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.

Briefing Note

Solvency and Liquidity stress test self-assessment tools

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.

Briefing Note

The impact of draft its on prudential disclosure on esg risks: an analysis

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.

Case Study

VALIDATION OF THE MONITORING TOOL

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.

Briefing Note

SREP 2020: INSIGHTS AND ANALYSIS FROM THE OUTCOMES

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

White Paper

A Practical Guide to Wind Down Planning

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.

Case Study

Recovery Fire Plan Drill

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.

Briefing Note

Transforming Data Collection from the UK Financial Sector

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.

Capital Management

Briefing Note

Capital Planning Tool - Forecasting Capabilities for Solvency Ratios

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.

Risk Management

Briefing Note

The IRB Supervisory Formula and Estimation Risk

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.

Case Study

Identification of Financial Risks Associated to Climate Change

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.

Case Study

Review of Stress Test Methodology for Financial Risks Associated to Climate Change

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.

Credit Risk Management

Briefing Note

New Trends In Credit Risk Management: Real-Time Analysis And Data Teams

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.

Reputational Risk

White Paper

Reputational Risk for Financial Institutions: The Quantitative Approach

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.

Case Study

COST-BENEFIT ANALYSIS POLICY PROPOSAL

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.

UK Finance

White Paper

Financial Services Future Regulatory Framework Review: Phase-II Consultation 2

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.

Case Study

Operational Risk Scenarios and Stress Testing

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.

Case Study

Transition to direct supervision by the European Central Bank

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.

Case Study

FORWARD FLOW ARRANGEMENT

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.

Case Study

RISK MANAGEMENT SUPPORT OF A UK SUBSIDIARY, EU BANK

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.