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Case Studies

Case Study

VALIDATION OF ADVANCED INTERNAL RATING-BASED LOW-DEFAULT PORTFOLIO MODELS

FOCUS ON: Case studies,

A large bank needed support to validate three AIRB (Advanced Internal Rating-Based) low default portfolio models. Avantage Reply assisted the client by validating all three models and by supporting various stakeholders in developing an approach to ensure the compliance with regulatory requirements. Avantage Reply not only completed the validation within a strictly limited time frame, but also provided a valuable third-party view regarding how to further improve the models and the model governance.

CUSTOMER GOALS & CHALLENGES

The client required Avantage Reply to carry out both qualitative and quantitative validation of three AIRB models. They also aimed to establish a comprehensive approach to Model Risk Management across the suite of models used by the Bank.

To effectively support the client, Avantage Reply needed to quickly gain a deep understanding of the client’s organization and its operations to develop recommendations within a short time frame. The client trusted Avantage Reply to deliver insights on industry practices and an assessment of the expert recommendations the client had been presented with so far.

SOLUTION

Avantage Reply benchmarked the Bank’s model validation approach against the industry standards, regulatory requirements and supervisory expectations. Avantage Reply also delivered three independent model validation reports, including recommendations for enhancement.

Avantage Reply also proposed concrete organizational changes based on their experience and industry best practices to optimize the governance within the client’s risk management function.

RELATED CONTENTS

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 Audit Co-Sourcing - COREP

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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