Approaches have changed as to how counterparty credit risk is measured and reported. Brickendon was engaged by a major US banking corporation to devise and rollout a standardised approach across the business and associated channels, such as QIS and ad-hoc calculators. The aim is to comply with new regulations from the Basel Committee on Banking Supervision (BCBS).
Challenges
- The investment bank and private bank operate from different infrastructures and data sets, and consolidate only at the very end of the reporting process. These processes need to be unified
- To create a single MI and reporting prices feed from a single consistent source
- MI can be interrogated at a trade level. Regulatory reporting will be at a book level
- Additional data will be required from foreign sources for the Private Banking business
- To coordinate between the different programmes requesting new data sources
- The Waterfall delivery approach means that only limited IT progress can be made ahead of the full requirements delivery
- Time constraints
The Brickendon Solution
- To create a brand new calculator with new data feeds that will replace the legacy system
- To ascertain precisely which information is required from each department to ensure the calculator has the correct information to produce an accurate result and one that complies with all regulatory requirements
- In order to do this, data needs to be standardised across all departments so that the quality of the information provided can be verified before being inserted into the calculator
- To remove any margin for error in the data supply, particularly discrepancies between risk and finance data
- To complete the development phase early enough so that the new calculator can run in parallel with the legacy system for three months prior to go-live
Client Benefits
- Regulatory compliance to ensure capital allocations are as efficient as possible
- A better handle on the quality of the data available within the organisation, which could in turn be used for other activities
- Use of strategic data sources to improve the accuracy of risk calculations and facilitate management support
- Improved data quality for KYC processes and regulatory reporting requirements
