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Case Studies

Case Study

ECB's OSI CREDIT RISK Remediation plan design and implementation

FOCUS ON: Case studies,

The client is a French Public Investment bank, which is active in three main business lines: support and financing for innovative projects (market oriented); Investment and Operational cycle financing alongside banking institutions; Bank financing guarantees and the involvement of equity investors.

THE CHALLENGE

Following the submission of the follow-up letter regarding the On-Site Inspection about Credit Risk management, the client asked Avantage Reply to set up an action plan. This plan had to remediate all the recommendations given by the ECB as well as to prioritise important deadlines. The following steps had to be performed:

  • Setting up a project governance mechanism to solve the recommendations to follow up the remediation process and keep the tracking files updated
  • Being the point of contact between the different stakeholders implicated in the process

APPROACH AND SOLUTION

To meet the client needs, Avantage Reply has adopted an approach based on four main steps:

  • Making an inventory of all the recommendations on the Credit Risk mission
  • Setting up and implementing a governance project: identify and implement the different committees which are responsible for the processing and supervision of the recommendations
  • Classifying the recommendations to be consistent with SREP elements
  • Identifying referrers in charge of the monitoring of a group of recommendations

After putting up the recommendations mechanism, the Avantage Reply team was responsible for both: preparation of the committees’ presentations and monitoring recommendations processing. During the assignment, the team was responsible for handling other different client requests related to the ECB recommendations.

RESULTS AND BENEFITS

The remediation plan and associated project governance has been implemented after its validation by the Executive Committee, allowing the client to actively work on the resolution of the recommendations. The new mechanism has been appreciated by the ECB and seen as a positive sign in terms of communication and transparency.

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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,..)

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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.

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The customer is a strong financial player present worldwide providing services in banking sector and insurance. The goal of the project was to conduct a co-sourcing Internal Audit on Common Reporting (Corep). Avantage Reply provided the client with a tailored assistance to its specific needs bringing its expertise and knowledge in order to perform high quality assessment of Corep governance processes.

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