Financial services case studies

Case Study

Implementing new ILAAP Handbook

The client wished to perform an enhanced gap-analysis of the organisation’s current ILAAP framework against the ECB and EBA guidelines as well as to use this information to design and implement an ILAAP Handbook/Framework document covering all in-scope entities. The final deliverable also included a detailed remediation roadmap, which helped the client and its entities to remediate and align their ILAAP processes across the Group in line with the regulatory and supervisory requirements.

Case Study

Review of Internal ratings methodologies

The project focused around the full review of the credit rating methodologies for non-financial counterparties, specifically models for sovereigns, corporates, funds and asset managers. The objective of the project was to test and document the credit rating methodologies to meet regulatory requirements and start the model validation process. Avantage Reply started the review with a pre-assessment of the rating model based on the best practices in order to identify the models’ gaps in different areas.

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.

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.

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

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.

Case Study

IRRBB – Support the transition of the IRRBB metrics computation tool and reconciliation exercise between both outcomes regarding EVE (Economics Value of Equity) and NII (Net Interest Income).

The Client, a huge international bank, request the support of Avantage Reply to further understand and quantify the differences arising between both of their IRRBB metrics calculators. The first, is a hand-made tool provided by the headquarter and the second is a well-known risk software solution used locally. Avantage Reply helps isolating and assessing each of the differences, and in case of materiality, set processes in order to compute overlays. Avantage Reply further helps to add and validate missing products. Validations cover parametrization of the tool, alinement of IRRBB inputs (margin and reference rate) and models (non-maturing products, prepayment, caps, floors,..)

Case Study

IFRS 9 Control Framework

The customer is a retail belgian bank focusing on mortgage loans and consumer credit. Following the implementation of the IFRS 9 ECL calculator, the need arised to implement a control framework to ensure timely and quality calculation and bookings, and integration in the accounting and reporting platforms. Avantage Reply helped the client bridge the distance between different departments to identify the right responsibilities at the right moment in the process to increase its reliability.

Case Study

Internal Liquidity Adequacy Assessment Process (ILAAP)

Belgian retail bank under the direct supervision of the European Central Bank (ECB). The Bank’s products and services are distributed on-line, through the network of offices in Belgium, and through brokers. The Bank requested Avantage Reply to enhance their Internal Liquidity Adequacy Assessment Process (ILAAP), not only complying with regulatory requirements but also going beyond them to meet supervisory expectations and align to best practices of the market. Therefore, from Avantage Reply we assist in the performance of the official document that will need to be submitted to the supervisory authority. This assignment is not only writing a document, but also looking into the market and new regulations published by the supervisory authorities, analyzing how other banks are facing the new challenges concerning liquidity and sharing our knowledge and experience of the financial industry.

Case Study

Regulatory Reporting Remediation Program - meeting ECB and CSSF requirements

Avantage Reply assisted a well-known Private Bank in Eurozone in improving the quality of FINREP & COREP reporting and in documenting internal production process. Out client needed to meet the requirements for the production of the harmonized reporting for European Central Bank (ECB), both in terms of quality, timely delivery, as well as in term of management of its interaction with the local regulator. Since reporting activities have been offshored, client must demonstrate that its interaction with service provider fulfils additional requirements from EBA and local regulator’s guidelines for outsourced functions. Avantage Reply team defined and implemented adequate control framework, supported analytical review of reports and documented operational aspects of the process. As result, regulatory reports were submitted within regulatory deadlines with considerably higher quality of data.

Case Study

IRRBB Audit Follow-Up

Avantage Reply assisted the internal audit department of a leading Private Bank in the Eurozone, a less significant institution (LSI) that is part of an international group, in the final steps of an internal review of the Interest Rate Risk in the Banking Book (IRRBB) framework. In summer 2019, Avantage Reply assisted the client following an audit by the national regulator regarding IRRBB and established an action plan to deal with the shortcomings identified during the regulator’s on-site inspection. The goal was to identify the status of these shortcomings and possible mitigations in order to achieve full compliance with regulatory requirements.

Case Study

Risk Analysis for the introduction of new lending products

The client, a public lending bank, wanted to introduce two new products to its portfolio and needed to conduct a risk assessment in order to determine the bank’s capital needs for these new products. The main problem was that the client had no internal data to support such an assessment. Using historic statistical data, AR provided the client with a model that allowed to assess the risks associated with these products and determine the capital needs for these products.

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