Search Results for tag: Banks and building societies Page 3

Case Study

Liquidity Risk Management Capability Diagnostic

The client was seeking an evaluation of its liquidity risk management capability in terms of the business being supported. Avantage Reply undertook a detailed review and provided recommendations for best practice liquidity risk management, which formed the basis of the client’s subsequent implementation programme.

Case Study

Data management, Risk data aggregation and Risk Reporting

The client was after a coordinated approach to dealing with new regulation, especially in data related aspects. Avantage Reply was engaged to assist with the development and implementation of a strategy to deal with data related regulation consistently across the Group. This was achieved by reviewing best market practice, setting up the right data organisation, clearly articulating the benefits and goals of the data programme and engaging all functions and divisions to realise the benefits.

Case Study

Participation Risk Assessment and Modelling

The client has a substantial portfolio of participations in mostly thinly-traded companies, and was seeking an independent assessment of its participation risk in the context of risk profiling and capital adequacy. Avantage Reply performed an analysis of the client’s participation risk while also providing recommendations on the investment process and associated risk management practices, specifically the quantitative models used to measure participation risk.

Case Study

Credit process enhancement within completion of Basel II AIRB application, including the review of credit risk equivalent measurement for global exposure monitoring

As part of the global implementation of its Basel II AIRB approach, the client was required to upgrade a number of credit processes and monitoring tools. In addition, an enhanced and consistent methodology was required for credit risk exposure equivalent measurements for banking book products. Avantage Reply provided a pragmatic solution for monitoring and reporting of these global exposures, by taking resource constraints into account.

Case Study

Credit Risk Weighted Assets Quantitative Impact Analysis

The client decided to participate in the review of the Basel II Framework calibration via the Quantitative Impact Studies (QIS), and submit the QIS results to the local regulator. Given the presence of data quality gaps in the client’s source systems due to the fact that the Basel II platform had not yet been fully implemented, Avantage Reply was engaged to develop a temporary solution to source and enrich reliable data to be used for submitting the QIS results, involving definition of requirements, stakeholder engagement and development of assumptions.

Case Study

Credit Risk Model Waiver Application Process

The client was planning to adopt the Internal Ratings Based (IRB) approach to calculating credit risk, which required the submission of a Waiver Application to the UK regulator. Due to the complexity of the client’s IRB approach as a result of multiple information sources, contributors and complex concepts, Avantage Reply was engaged to coordinate the preparation of and review the Waiver Application. Avantage Reply worked with the client to create a waiver application pack, ensuring it was consistent in format and content, it was representative of the actualities of the client, and gaps with regulatory requirements were identified.

Case Study

Basel II Reference Data Solutions

The client lacked the level of data quality required to satisfy the Basel II Accord’s new standards for banks’ information systems. Avantage Reply was engaged to assist with the development and implementation of a reference data strategy to improve the standard of data quality and bring order to the seemingly infinite stores of disparate data and applications. These aims were achieved by developing a clear definition of reference data, organising a data cleansing programme, and developing a new governance and operating model supporting the full data management lifecycle.

Case Study

Basel II, Pillar 1 Reporting Analysis

The client was experiencing difficulties with providing timely analysis and reporting to satisfy the requirements of Pillar 1 of the Basel II Accord, specifically in the area of collateral management. Avantage Reply was engaged to facilitate improvements in the speed and accuracy of Basel II reporting, with the aim of allowing reporting & collateral management teams to move steadily from “fire control” to more strategic planning and development of new processes and systems. Steps were taken also to ensure underlying data quality issues were resolved.

Case Study

Basel II Credit Risk Mitigation Policy

The client initiated a Basel II Credit Risk Mitigation (CRM) Policy project to ensure business processes and capital calculation processes for risk mitigation techniques were covered in a new policy which was compliant with the UK interpretation of Basel II. Avantage Reply was engaged to create the CRM Policy and a framework for its implementation and ongoing maintenance. The CRM Policy document was formally agreed by the relevant business stakeholders and approval was received by the FSA to use the CRM in the client’s loss given default estimates, which led to a significant capital reduction.

Case Study

Review of foreign exchange risk management capability

The client maintains a single currency ledger which does not capture the distinction between realised and unrealised exchange differences arising from non-functional currency transactions, resulting in an inability to manage FX rate risk. Avantage Reply was engaged to specify and report on the appropriate data capture systems and exposure management engine required to identify and quantify all FX transactional exposures. This report would form the basis for a functional specification used by IT to develop the appropriate systems and processes required to implement an effective FX risk management policy.

Best Practice

European Banking Authority Basel III Monitoring Exercise Results

The Basel III framework is intended to increase the resilience of the banking sector by strengthening the quality and quantity of regulatory capital and setting liquidity standards. The impact of the new requirements is being monitored and evaluated semi-annually on a global level by the Basel Committee on Banking Supervision (BCBS or the “Basel Committee”). At the European level this analysis is conducted by the European Banking Authority (EBA), the successor to the Committee of European Banking Supervisors (CEBS).

Best Practice

CRD 4: Introduction of New Supervisory Reporting Requirements – Liquidity Coverage & Stable Funding

To achieve a high level of harmonisation and convergence in supervisory reporting requirements, the CRD 4 proposal contains specific mandates for the European Banking Authority (“EBA”), requiring it to develop draft Implementing Technical Standards (“ITS”) specific to supervisory reporting requirements. On the 7th June 2012, the EBA published a consultation paper on draft ITS specifically addressing new liquidity coverage requirements, including the stable funding ratio (CP/05).

Best Practice

CRD 4: Introduction of New Supervisory Reporting Requirements - Leverage Ratio

To achieve a high level of harmonisation and convergence in supervisory reporting requirements, the CRD 4 proposal contains specific mandates for the European Banking Authority (“EBA”), requiring it to develop draft Implementing Technical Standards (“ITS”) specific to supervisory reporting requirements. On the 7th June 2012, the EBA published a consultation paper on draft ITS specifically covering the leverage ratio as a new monitoring tool (CP/06).

Best Practice

CRD 4: Introduction of New Supervisory Reporting Requirements (Large Exposures)

To achieve a high level of harmonisation in supervisory reporting requirements, the CRD 4 proposal contains specific mandates for the European Banking Authority (“EBA”), allowing it to develop draft Implementing Technical Standards (“ITS”) specific to supervisory reporting requirements. On the 13 February 2012, the EBA published a consultation paper on draft ITS on reporting of large exposures (CP51).

Best Practice

CRD 4: Introduction of New Regulatory Requirements for the Quality of Tier 1 and 2 Capital

The Basel 3 framework is intended to increase the resilience of the banking sector, amongst others by strengthening the quality and quantity of regulatory capital. In the European Union the proposed Capital Requirements Directive and Capital Requirements Regulation (referred to as “CRD 4” and “CRR 4”, respectively) will implement the Basel 3 requirements from 1 January 2013. The combined CRD/CRR 4 proposal also provides a mandate to the European Banking Authority (“EBA”) to develop binding Regulatory Technical Standards (“RTS”) relating to the quality of Tier 1 and 2 capital, also known as the regulatory capital base (hereafter referred to as “own funds”).

Case Study

Model Development and Validation Governance and Standards

The client initiated a project to define and implement a governance framework for model development and validation, to be applied to credit risk models of its wholesale business. Avantage Reply was engaged by the client to assist with developing the governance framework in the form of a reference handbook of standards to be utilised by stakeholders of the four main stages of the standard model lifecycle; i.e. origination, development, deployment and review. The new framework provided benefits consisting of improved objectivity, consistency, control and transparency throughout the model lifecycle.

Case Study

Support to Compliance Function

In the context of the extension of its activities and the integration of recently acquired businesses, the Luxembourg subsidiary of an international banking group sought to identify relevant risk, treasury and capital management regulatory requirements, and to assess whether its current operating model and capabilities were adequate. Avantage Reply supported the client’s Compliance Function by undertaking a review of existing requirements, developing a user-friendly tool, and providing training sessions.

Case Study

Intra-group and Whole-firm Liquidity Application

A leading financial services institution, with a number of branches and subsidiaries in the United Kingdom, sought to evaluate the benefits and feasibility of applying for a whole-firm liquidity modification and intra-group liquidity modifications, and to draft the applications. Avantage Reply was appointed to the client’s “Liquidity Project Steering Committee”, evaluated the merits of applying for a modification, and assisted in drafting the applications which were successfully submitted to the FSA.

Case Study

Implementation of EMIR and CRD IV Counterparty Credit Risk Capital Requirements

Avantage Reply evaluated the impact of EMIR and MiFID 2/MiFIR, and identified the ‘touching points’ between CRD IV, EMIR and MiFID, focussing on the front to back infrastructure implications as well as the risk and reporting implications. Avantage Reply delivered solutions that enabled the businesses to continue to maintain their operating model and service offerings, providing recommendations on how the potential impact of the regulations could be minimised. We further assessed the merits of alternatives or amendments to the existing businesses and/or operating models.

Case Study

Development and Implementation of Collateral Management Framework for CCP/Non-CCP Cleared Products (incl. OTCs)

The client was seeking to document the Collateral Management (“CM”) Framework to ensure CRD IV and EMIR compliance. The CM Framework scope included all products subject to collateral requirements for Counterparty Credit Risk (“CCR”) mitigation, including CCP and non-CCP cleared products such as OTC derivatives. Avantage Reply provided the subject matter expertise required to conceptualise, develop and formalise the CM Framework.

Case Study

Collateral Management: Unlocking the potential in collateral

A Transactional Bank specialised in securities services sought a better understanding of the impact of recent market and regulatory dynamics in the collateral management business and in liquidity management, and wanted to test key working assumptions in the market. Avantage Reply was engaged to interview representative banks and use other sources of research, which resulted in the production of a paper the client intends to use in public presentations and in articulating their business proposition.

Best Practice

Repercussions of the Transition to the IFRS System, including a Technical System Appraisal

The merry-go-round of regulatory changes is constantly turning, and continuously presents new challenges for banks. A further complication is added by the CRD IV since one section has been adopted as a regulation and is to be directly applied nationally without being implemented nationwide. In so far as they have not been directly incorporated into the CRD IV or at least been included in provisional regulations, national options generally do not apply.

Case Study

Review of foreign exchange risk management capability

The client maintains a single currency ledger which does not capture the distinction between realised and unrealised exchange differences arising from non-functional currency transactions, resulting in an inability to manage FX rate risk. Avantage Reply was engaged to specify and report on the appropriate data capture systems and exposure management engine required to identify and quantify all FX transactional exposures. This report would form the basis for a functional specification used by IT to develop the appropriate systems and processes required to implement an effective FX risk management policy.

Best Practice

Prudential Filters. Adjustments to the Equity based on Consolidated Financial Statements as per IFRS

Capital market-orientated banks which have to prepare their consolidated financial statements as per IFRS and banks which voluntarily prepare consolidated financial statements under IFRSs have, since 01/01/2007, been able to determine the level of equity based on consolidated figures as per their consolidated financial statements under IFRSs (option under Sec. 10a(7) German Banking Act (KWG)).

Case Study

Regulatory Compliance Strategy – Internal Ratings Based (IRB) Approach

The client was seeking approval to use the IRB approach to determine the credit risk regulatory capital charge on its retail exposures. Avantage Reply was asked to outline and agree the method of delivering ‘Use Test’ requirements within the client’s European retail market operations, as part of the client’s IRB approach application. Avantage Reply planned and implemented the key IRB steps required to achieve compliance within the regulator-imposed timeframe, while being mindful of the key risks and challenges for the programme.

Case Study

Project: Operational Risk – Controls ‘Self-Assessment’ framework

The client had identified that there was no cohesive view on the risk and control environment relating to its newly-created shared service risk function (SSRF), and were concerned that compliance with Group minimum standards on policy and controls were not being met or measured. Avantage Reply was asked to undertake a comprehensive review of the SSRF team’s existing operational risk framework, processes and practices to identify inherent risks, existing controls and gaps in the framework, and deliver the findings to the COO. A self-assessment controls testing framework was also established and remedial action was proposed to rectify inadequacies of existing processes and practices.

Case Study

Economic Capital Calculation and Management Data

The client engaged Avantage Reply to manage its Basel II-related business analysis function within the scope of the Pillar 2 process, particularly the calculation of Economic Capital (EC). Avantage Reply provided three consultants to perform several functions integral to the creation of the EC calculation process, including functional design, data analysis, KPI creation and project management. The initiatives developed by Avantage Reply were compliant with Pillar 2 requirements.

Case Study

Economic Capital: Risk-based decision making and risk culture

The client initiated an Economic Capital (EC) project to embed a stronger risk culture throughout the institution reflected in a more robust risk-based decision-making process, by building an EC application “in-house” with the assistance of Avantage Reply. The objective of Avantage Reply’s solution was to enable the provision of consistent and reliable information appropriate to each decision maker, with the requisite sophistication and enterprise-wide coverage. The EC model provides many benefits including capital management reporting and strategic portfolio planning, the effective management of risk profiles, and the allocation of EC to each transation to facilitate risk pricing calculations for lending decisions.

Case Study

Credit Risk Weighted Assets Quantitative Impact Analysis

In order to engage in a QIS exercise Avantage Reply was consulted to develop a temporary solution that would source reliable data and enrich the data for the purpose of preparing the information templates required by the regulator, since the client had not yet fully implemented its Basel II platform.
Firstly, Avantage Reply defined and agreed the high level requirements of the exercise. Secondly, the Avantage Reply team engaged with the stakeholders in several countires to retrieve available data and establish data gaps and data quality issues. Besides, a set of assumptions was developed for any missing data and agreed with business owners.
This approach led to a timely and successful submission of the QIS templates, and marked milestone in client’s implementation of Basel II. Finally, an essential step in the discussion on the proper calibration of the new regulatory minimum capital requirements was taken.

Case Study

Credit Risk Operating Model

The underperformance of the client’s Credit Risk IT team, as indicated by a back log of approx. 200 change projects, was being driven by a number of factors: the presence of legacy IT applications, historical underinvestment in the team, and eroded relationship with the business. Avantage Reply transformed the client’s Credit Risk IT function by working as an extension of the client’s team in developing a common understanding of the target operating model and target architecture, developing a programme of work for the team, and organising the most appropriate resources for the team. The relationship between the Credit Risk IT team and the business has moved to one of partnership with an established record of delivery.

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