Support with Credit Risk Regulatory Inspection

SUMMARY

The client, a European-based leading bank in online financial services that offers state-of-the-art solutions to meet investment needs, required support from Avantage Reply on the preparation of a regulatory inspection for Credit risk and IT-related topics.

CUSTOMER GOALS

The customer needed support from our team of experts in two areas:

1. Support with the preparation for the regulatory inspection based on the list of documents that were requested by the regulator
2. Knowledge of best market practices regarding various credit risk-related topics like calculation of RWA, Standardised Approach for credit risk, Lombard loans, IFRS provision model, EBA Loan origination guidelines etc.

In addition, during the regulatory inspection, our team consulted the client regarding the treatment of questions raised by the regulator.

CHALLENGES

The interaction between stakeholders during the project took place remotely. Therefore, one of the main challenges was to engage the key stakeholders and ensure their project expectations were met. Moreover, another challenge was ensuring that access to the required documentation was provided on time so that the exhaustive review is performed within the tight timeline, as requested by the local regulator.

SOLUTION

Avantage Reply provided two resources who performed the detailed review of the credit risk processes and procedures including a technical review of the IFRS 9 impairment models and RWA calculation approach.

The deployed team conducted the following:

• Reviewed various internal procedures against the local regulatory requirements applicable to the client’s risk management function
• Conducted several meetings with the bank’s Chief Risk Officer (CRO) to ensure alignment of internal procedures with regulatory requirements
• Assisted the client with the preparation of key points to present to the local financial regulator
• Provided insights on the treatment of Lombard Loans under the EBA Loan Origination guidelines
• Reviewed the approach used for the calculation of RWA
• Supported the client with the drafting of answers to the local regulator