• about reply
Avantage Reply Logo
Menu
  • About Us
    About Us
    • About Us
    • History
    • Our Approach
    • Values
    • Alumni
    • Strategic Partners
    • Media Contacts
    • Contact Us
  • Our Capabilities
    Our Capabilities
    • Our Capabilities
    • Risk
    • Insurance
    • Finance
    • Conduct & Compliance
    • Technology
  • Newsroom
    Newsroom
    • Newsroom
    • News
    • Events
    • Press Articles
    • Blog
    • Academy
  • Publications
    Publications
    • Publications
    • Briefing Notes
    • Case Studies
    • CRO Insights Journals
    • Infographics
    • White Papers & Practical Guides
  • Career
    Career
    • Career
    • BELGIUM
    • FRANCE
    • ITALY
    • LUXEMBOURG
    • NETHERLANDS
    • UK
  • about Reply
Avantage Reply Logo

Search

Case Studies

Case Study

Counterparty Credit Risk (Pillar 1 and 2)

FOCUS ON: Case studies,

SUMMARY

The client, a major banking group specialised in the provision of online banking and trading services, was in the process of launching new derivative products for its retail clients and required assistance for the counterparty credit risk calculations and regulatory reporting of these products.

The project had three major areas of focus:

  • Assessment of the Pillar 1 Counterparty Credit Risk (CCR) capital requirements for the new products;
  • Development of the stress testing for the Pillar 2 (i.e. ICAAP) to incorporate the new products;
  • Assessment of the additional reporting requirements for new products.

CUSTOMER GOALS

The bank wanted to conduct a comprehensive risk management assessment of the derivative products to understand the following:

  1. How should the bank calculate the capital requirements for the Counterparty Credit Risk under a Mark-to-Market Approach?
  2. How should the bank capture these products in its Internal Capital Adequacy Assessment Process (ICAAP)?
  3. What stress testing scenarios should the bank implement in the ICAAP?
  4. What are the relevant reporting requirements the bank will have to fulfil regarding these new products?

CHALLENGES

Avantage Reply’s team was well prepared for the engagement and received all the necessary support from the client. However, a number of challenges became evident over time such as:

  • The bank’s dependence on the decision making processes within the Group, which significantly slowed down the project;
  • The client had no prior experience with derivatives, which required additional time for the client to understand all the activities involved;
  • Since the products had not been finalised at the time of the engagement, a number of assumptions had to be made regarding the final product and processes to be conducted by the bank.

SOLUTION

In order to deliver on the objectives outlined in the customer goals section, Avantage Reply put together a team of CRR (i.e. Capital Requirements Regulation), ICAAP and derivatives experts, which conducted the following tasks:

  • Review of the scope for the derivative products, current processes, systems and data to be used;
  • Definition of the methodology to calculate the CCR capital requirements;
  • Building an excel tool showcasing the calculation for a variety of derivative contract types (i.e. FX, equity, commodity);
  • Developing a dedicated stress test for the new products to be included in the ICAAP report;
  • Definition of the scope of new reporting requirements and assembling all these new reporting requirements for derivatives in a comprehensive list.

RELATED CONTENTS

Case Study

Support to Risk Management: Risk monitoring tool migration

The client is a large multinational asset management company. The customer needed assistance on the migration of its risk monitoring tool (from RiskMetrics to Aladdin Risk). Avantage Reply supported the client on the risk monitoring tool migration as Project Manager, leveraging on industry knowledge and internal know-how.

Case Study

Liquidity & Interest Rate Risk Assessment on Complex Financing Structures

Avantage Reply assisted a well-known universal bank in the Eurozone to analyze, assess and document the potential liquidity and interest rate risks related to complex financing structures. The tailor-made financing solutions are important for more sophisticated clients, mostly corporations with precise financial needs, and aim at financing them via term loans, leasing, liquidity raising, securitization or short-term investments.

Case Study

National Central Bank Reporting Support

Avantage Reply assisted the finance department of a well-known bank in updating its process to produce monthly and quarterly statistical reporting for the Nation’s Central Bank, following the publication of the updated guidelines. This guideline modifies the statistical reporting requirements for credit institutions

 ​
 
 ​
 
Reply ©​​ 2023 - Company Information -
 Privacy Cookie Settings​
  • Abou​t Reply​​
  • Investors​​​
  • Newsroom
  • Follow Reply on
  • ​
​
  • ​About Avantage ​​Reply
  • Privacy & Cookies Policy
  • Information (Client)​
  • Information (Supplier)
  • Information (Candidate)