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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.

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.

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.

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.

Climate Risk

Briefing Note

Environment & Climate Risk RMF Self-assessment

Leveraging on ECB Guide on climate-related and environmental risks and emerging market practices, Avantage Reply has developed a self-assessment tool for financial institutions. The key objective is to help financial institutions while engaging bilateral discussions with ECB early 2021 and evaluating internal capabilities in terms of Environment and Climate-related risk management framework. Interactive and practical, the self-assessment tool covers the key building blocks of ERM function and assesses an institution’s readiness and preparedness in identifying, measuring and managing climate-related risks. Integration of climate dimensions at the highest level of the organization is key due to the transversal impact of climate risk over credit, market, liquidity, operational and other transversal risks.

Stress Testing

Briefing Note

Impact of COVID-19 on Stress Test Models

Since the 2008 financial crisis, regulators have emphasised the importance for banks of using stress tests to better identify potential weaknesses in their banking books, trading books and liquidity positions in the event of market turmoil. This paper will show model outcomes likely to be observed by banks in the 2021 STEBA and propose solutions and considerations for banks to mitigate the risk of having to deal with unrealistic model outcomes.

Regulation

Briefing Note

Supervisory Expectations for International Banks in the UK

On 11 January 2021, the Prudential Regulation Authority (PRA) published a set of documents to outline its approach to international banks (including designated investment firms) operating in the UK, covering both subsidiary and branch structures. This was expected. Our briefing note summarises the key proposals and outlines what they mean for international banks.

ICAAP

Briefing Note

ICAAP quantitative tools

Leveraging on its experience and in line with market practices, Avantage Reply has developed several assets for the ICAAP covering risk quantification and capital planning. This tools are covering the following themes: 1) Risk identification; 2) IRRBB 3) Credit Concentration risk 4) Operational risk 5)Capital planning

ICAAP & ILAAP

Briefing Note

ICAAP & ILAAP Internal Self-Assessment

Leveraging on its experience and in line with market practices, Avantage Reply has developed ICAAP ILAAP self assessments tools. Interactive and easy to use, the self assessment tools cover the key building blocks of ICAAP and ILAAP frameworks and provide an overview that will help benchmarking frameworks in place against supervisory expectations and best practices. ICAAP and ILAAP integrated at the highest level of the organization is key for a proper use of both processes into the decision making process.

Operational Resilience

Briefing Note

Operational Resilience – Principles for a Post-Pandemic World

Covid-19 as well as other physical events have left UK financial institutions anxious about their abilities to continue critical operations during crises. The objective of this paper is to summarize key changes to the Principles for the Sound Management of Operational Risk and highlight the ways in which Avantage Reply can assist FS firms in improving their operational resilience.

Green Economy

Briefing Note

The Roadmap: Paving the Way to a Green Economy

On 9th November, the UK Treasury published a roadmap for mandatory disclosures outlining HMT’s explicit expectations regarding increased transparency and its continued focus on the management and mitigation of climate-related risks. Learn more about the significance of these expectations in this briefing note.

Operational Risk

Briefing Note

Operational Risk - Mitigating Disruption

Banks have now submitted their feedback on the Consultative Document on the Revisions to the Principles for the Sound Management of Operational Risk (PSMOR) published by the BCBS in August. In this briefing note, we contextualise the key proposed revisions to the PSMOR against the regulatory direction of travel over the last decade.

Green Economy

Briefing Note

Sustainable Finance - Transitioning to a green economy

During 2019/2020, the UK and EU introduced multiple climate documents to embed sustainable finance into financial systems to assist in the transition to a climate-neutral economic area. The objective of this short paper is to summarise key current documents, followed by an overview of upcoming guidance.

Briefing Note

IBOR Transition: Avantage Reply's Offering

In 2017, the Financial Conduct Authority (FCA) announced that it would cease to compel banks to submit their input rates for the computation of the London Inter-Bank Offered Rate (LIBOR) starting from the end of 2021. The latter has led the Financial Sector to a consensus around structurally different replacement rates that would provide a get-around to the main limitations that led to the discontinuity of LIBOR’s.

ICAAP

Briefing Note

ECB report on bank's ICAAP practices

Since the establishment of the Single Supervision Mechanism (SSM) under the European Central Bank’s (ECB) mandate, banks directly supervised by the ECB are required to submit an Internal Capital Adequacy Assessment Process (ICAAP) package on an annual basis. This submission is aimed at demonstrating the robustness of banks’ internal processes in relation to the identification, assessment and measurement of their risk profile and the availability of sufficient capital to support their risk profile.

Covid-19

Briefing Note

ECB COVID-19 Reporting

The ECB has mandated a new reporting exercise in the light of the COVID-19 crisis in an effort to ensure the timely and consistent monitoring of the risks sparked by the outbreak and to widen the scope beyond the SREP STEs, FINREP and COREP, through the inclusion of credit moratoria and state guarantees figures. The reporting shall be submitted to NCAs on a monthly basis until at least December 2020, and is expected to raise several implementation challenges for SIs on the organizational and operational levels (including capacity and data aggregation issues).

ESG

Briefing Note

Environmental, Social and Governance in Investment and Banking

A growing number of stakeholders, from governments to individuals, pension funds and asset managers, have realised that the application of ESG criteria is in line with their financial objectives. Around the world, investment strategies based on sustainability criteria are growing to become a new service line tending to the needs of the stakeholders: supervisory bodies, financial institutions and all customers.