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 The former directives have now been replaced by new and significantly more complex capital adequacy framework commonly known as Basel III for banks.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:
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:
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:
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.
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:
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 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:
Business & Decision will guide you in:
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:
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.
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.
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.
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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.
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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 Business & Decision Risk Technology Consulting team can help you:
From past missions and solution implementations we selcted a number of case studies.