Banking Regulations

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Basel III

Capital management has evolved to become a central topic in all financial institutions. Prudential Banking Regulations set a framework on how banks must handle their capital. The former directives have now been replaced by new and significantly more complex capital adequacy framework commonly known as Basel III for banks. Its purpose is to strengthen the ability of the financial sector to absorb shocks arising from financial and economic stress.

Even if the accord provides common ground for all jurisdictions, regional and national regulators introduce specific rules for calculating bank capital. With CRD IV, the EU is implementing the new standards defined in Basel III. These national discretions are designed to meet the common requirements within their individual legal framework.

Based on their solid international experience in such projects, Business & Decision consultants will assist you to comply with both the broad regulation and the various national discretions. Discover our expert consulting services around regulatory reporting:

Pillar I

The Business & Decision Risk Management team has worked extensively on capital ratio calculation projects, especially on the Pillar 1 for Basel II and Basel III. We have successfully completed projects at more than 30 reference customers in Europe and beyond. Our interventions cover all aspects of the minimum capital requirements: 

  • Information Management assessments, Architecture Studies
  • Prototypes of Calculation Engine (or Proof of Concept) for capital ratios (common Equity Tier 1, Tier 1 Capital and Total Capital)
  • Risk Engine Design, Implementation and Migration for the calculation of Credit Risk, Operational Risk, Market Risk, Settlement Risk and CVA Risk
  • Development and integration of risk models (detailed in the Credit Risk modeling section)
  • Data management, thanks to our broad Business Intelligence expertise, namely building of Financial Risk Data Warehouses to feed the Risk Engines
  • Set up of a Data Governance Office and a Data Quality process around risk and finance data
  • Project Management and Change Management
  • Business Process Re-Engineering

Liquidity

Searching for the necessary tool for effective liquidity risk management? The expertise of our risk management consultants covers the technical and functional architecture, the liquidity measurements and the reporting that constitute the core framework for effective liquidity risk management. Our consultants will help you develop and implement a robust and integrated liquidity management solution with:

  • Projection of Cash Flows from assets, liabilities and off-balance sheet items over appropriate time horizons and under different scenarios
  • Calculation of the Liquidity Coverage Ratio (LCR), Net Stable Funding Ratio (NSFR) and Leverage Ratio
  • Build of reliable reporting on the intraday liquidity positions
  • Tools to actively manage risks and meet payment obligations on a timely basis under both normal and stressed conditions
  • Source inventory, data marts build, functional and technical architecture

Pillar 2

Pillar II includes additional capital requirements, which fall under the scope of economic capital (EC). In addition to the capital requirements imposed in Pillar I, banks must comply with capital adequacy guidelines as set out in Pillar II (i.e. ICAAP). Business & Decision will guide you in the implementation of the whole Economic Capital framework. Creating added value from a solid data warehouse design to the core of the financial modeling and aggregation, we will help you come up with an amount of economic capital in line with your organization's needs. 

ECAP / ICAAP

Measuring Economic capital involves assessing the impact on the fair value of the different parts of the business of the various risks a bank faces such as market, credit, liquidity, insurance, operational, etc. Taking into account the risk compensation is also a part of an efficient economic capital framework. The last step is to establish how the aggregated Economic Capital requirement can be allocated back to the various business lines and risk factors. This strategic view will enhance the management investment and optimization decisions.Ultimately the framework will provide concrete reports on concentration risk, capital usage by business units, diversification benefits and stress-testing.

Bringing their financial and technical knowledge, our consultants can help you take the best of each step of the process:

  • Build a solid data warehouse design for the required data
  • Define an efficient process (or re-engineer the existing) for timely collection of data (sign-off process)
  • Model and aggregate the financial data to calculate the amount of the economic capital in line with your organization's requirements
  • Build an efficient reporting system

Pillar III

Pillar III focuses on market discipline through regulatory disclosure requirements. It aims at enabling market participants to assess more easily key information relating to capital requirements and risk exposure, and eventually to improve comparability between the financial institutions. Pillar III provides standardized reporting frameworks to support the disclosure of the regulatory capital requirements measures defined in Pillar I. Under Pillar III, financial institutions have the obligation to provide quarterly COREP, FINREP, NSFR, Leverage and Large Exposures reports as well as monthly LCR reports.

COREP

COREP is a standardized reporting framework on prudential reporting, as part of Pillar III. COREP reports ensure a fair disclosure of a financial institution’s risk exposures, regulatory capital requirements and capital buffers. As the European Banking Authority (EBA) requires quarterly COREP issuances, financial institutions face the following challenges:

  • Diagnosis of the business to calculate the risk-weighted exposure and the capital requirements
  • Development of an adapted technical solution which supports the business requirements
  • Rapidly changing regulation on reporting requirements leads to developing flexible reporting solutions

Business & Decision will guide you in:

  • Preliminary regulatory analysis on reporting obligations
  • Study of the business and technical requirements as to integrate a reporting engine
  • Implementation of external (COREP) and internal prudential reporting solution
  • Linking Risk Engines output to reporting engines
  • Hand-over and training

 

FINREP

FINREP is a standardized financial reporting framework applicable to both IFRS and national accounting standards. Inspired by the IFRS framework, FINREP englobes traditional financial statements (Balance Sheet, P&L and Cash Flow Statement) but goes beyond the norms by requiring additional information (e.g. on interest income breakdown, collateral breakdown, interest payment maturity split). These additional requirements – coupled with tight reporting deadlines and fast changing regulations – requires the banking sector to develop more adapted and more flexible financial reporting systems. Due to their experience in the design, development and integration of such solutions, our consultants will guide you in:

  • Readiness assessments
  • Development of reporting data models and reporting solutions
  • Data acquisition capabilities
  • Training and change management expertise
  • Specific regulatory, technology, data and project leadership

European Central Bank Regulations

European Central Bank's Analytical Credit Dataset (AnaCredit) - 2017 update

Date: 08/03/2017

Abstract
The REGULATION (EU) 2016/867 OF THE EUROPEAN CENTRAL BANK of 18 May 2016 on the collection of granular credit and credit risk data (ECB/2016/13)1 has been passed and published in the Official Journal of the European Union.
This will impact all the credit institutions based in the European Union, subject to reporting to the National Central Banks.
This paper goes through the Analytical Credit Datasets (AnaCredit) data requirements, highlights them and the timeline, then goes on listing the major challenges to be faced by credit institutions to be compliant with AnaCredit.
It then proposes several solutions to tackle these challenges and lays the foundations for defining a roadmap of initiatives that can be launched by credit institutions.

Audience
People working in a credit institution and in charge of regulatory reporting, regulatory compliance, responsible for AnaCredit programs, Risk and Finance managers, programs or projects responsible, in charge of data governance and data quality, system architecture or IT.

Keywords
AnaCredit, BCBS 2392 , analytical credit datasets, credit, credit risk data, credit exposures, lender, loan contracts, borrowers, granular data, Central Credit Registers (CCRs), National Central Banks (NCB), data quality, data governance, architecture, information model, data integration, data traceability.

Click on the image to download 

2017 Whitepaper AnaCredit - Be Prepared for It

 

 

Previous Whitepaper - Be Prepared for ECB’s Analytical Credit Dataset AnaCredit

Date: 27/05/2015

Abstract :

Recent evolutions in the financial sector and associated regulation has further highlighted that, to drive a more efficient and timely set of monetary policies, financial stability and counter-systemic measures, to benefit from accurate statistics and research, more granular, more frequent and more standardized credit and credit risk data are needed within the European System of Central Banks (ESCB).

In this context, the Central Credit Registers (CCRs), which are operated by several National Central Banks (NCBs) in the EU, appear as the principal data provider. Their databases have proven to be valuable sources of information for the financial industry, for assessing the credit situation of potential borrowers and benchmarking credit risks, and by supervisory authorities in assessing the credit risk of credit institutions and other lenders. In many countries, (complementary) granular credit data may be available from private credit bureaus or via surveys.

This paper goes through the Analytical Credit Datasets (AnaCredit) data requirements, analyses the coverage of these requirements by looking at the current reporting made at a national level, states the possible impact on the current information model, highlights some of the challenges, the provisional timeline and finally, lays the foundations for defining a roadmap of initiatives that can be launched by credit institutions.

Click on the image to download

Be Prepared for ECB’s Analytical Credit Dataset AnaCredit


National Bank Regulations

Central Credit Register

Credit institutions in Belgium must report on a regular basis to the National Bank of Belgium.In Belgium, the NBB counts two CCRs, one for each borrower type:

  • The Central Credit Register Reporting for Enterprises (CKO2/CCE2): credit institutions have the obligation to report on a borrower-by-borrower basis, every month, the credits granted to legal persons, residents, non-residents and individual entrepreneurs.
  • The Central Credit Register Reporting for Private Persons (CKP/CCP): credit institutions have the obligation to report on a loan-by-loan basis, the regulated credits granted to natural person residents, within two working days and the defaults on the regulated and non-regulated credits within 8 working days. Some of the credit institutions in Belgium have chosen to report on a daily basis.

The Business & Decision Risk Technology Consulting team can help you:

  • Perform an  Assessment of your current information model
  • Bring their functional knowledge on a bank’s credit lifecycle including overdue and contentious management
  • Create a data mart for the reporting to the National Bank and the two Central Credit Registers
  • Integrate with a dedicated reporting tool, such as Mainsys’ Cocpit
  • Bring their functional knowledge on a bank’s credit lifecycle including overdue and contentious management
  • Extend your reporting solution / build a new reporting solution for AnaCredit requirements

Case Studies

From past missions and solution implementations we selcted a number of case studies.

Capital Calculation and Management

Economic Capital Calculations - Risk Technology Consulting

 

 

 

 

 

 

Economic Capital Calculation

Economic Capital Calculations - Risk Technology Consulting

Partners


Experience with the following risk technologiesInformation text on the opening of the image in lightbox (magnifying glass)

 

Key deadlines CFO's and CRO's shouldn't miss

The Risk & Finance regulatory landscape in Europe will undergo big changes over the coming years. This note gives an overview of the most important topics and deadlines.
Click on the image to download the white paper

 

AnaCredit White Paper

To get to know the challenges of the ECB's AnaCredit Regulation and how Business & Decision proposes to address them practically:

Click on the image to download the white paper

2017 Whitepaper AnaCredit - Be Prepared for It