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Case Studies

Case Study

Regulatory Reporting Support

FOCUS ON: Case studies,

The bank needs the assistance to Luxembourg Regulatory Reporting team in reviewing the statistical reporting procedures, namely S-b-S (Titre Par Titre), SEPA (PS), BOP (Balance of payment) and BoP statec, and training the new resources arriving from a newly acquired company on these reports.

CUSTOMERS GOALS

After the acquisition of a new entity, the bank invited us to execute 4 regulatory reports (BoP, BoP Statec, TPT and SEPA), to verify, to reconcile, to analyze and to deliver the statistical reports to BCL. The next step is to rewrite the procedures in order to train the new-comers and to make sure that they are able to conduct the reports autonomously.

THE CHALLENGE

In a short timeframe, the client requested a review of the Data Governance Framework and assessment of the data quality in light of ECB expectations. The regulatory requirements included BCBS 239, EBA Guidelines on Internal Governance (EBS-GL-2017-11), and CSSF Circular 12/552 on Central Administration, Internal Governance and Risk Management.

Also, the client requested a deep dive in important data points, which was a major challenge due to the diversity of data types and the number of contacts which needed to be interviewed. Additionally, the definition of roles and responsibilities turned out to be a significant challenge.

APPROACH AND SOLUTION

Avantage Reply reviewed the supporting documentation regarding Data Governance Framework and definitions of Roles and Responsibilities and conducted a gap analysis between status quo and ECB expectation in light of the regulatory environment as mentioned above. Based on this gap analysis, Avantage Reply provided a readiness assessment concerning the direct supervision by the ECB and the accompanied expectations. Also, practical recommendations were given to the client, including a strategic roadmap for the following year.

Additionally, a Data Quality Assessment for a subset of 60 data points was performed. This exercise led to a list of data quality issues and recommendations for remediation, including a categorization of the issues in light of urgency and impact.

Finally, Avanatge Reply organized a workshop with peers from the industry which experience direct supervision by the ECB, in which the client was able to receive direct feedback on the readiness of the institution and the requirements by the ECB.

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Counterparty Credit Risk (Pillar 1 and 2)

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.

Case Study

Standardised Approach for Counterparty Credit Risk

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 with calculating the capital requirements for counterparty credit risk under the new standardised approach. This project was a continuation of similar work which Avantage Reply performed prior for this client, regarding the mark-to-market approach.

Case Study

Development and implementation of the IRB-models

Avantage Reply supported a large bank in Luxembourg with a complete transformation of the internal credit risk model portfolio. In doing so, our team was involved in several steps of the model lifecycle: model development, model backtesting, model validation by the second line of defense, model review by the ECB and implementation of the model in the bank’s IT system.

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