The challenge
Under the international capital framework, Basel II compliance was mandatory for all internationally active institutions. Our mandate was to enable the calculation and reporting of regulatory capital under this revised framework. A key component for the bank was to gain regulatory approval to use the Advanced Internal Ratings Base approach for the calculation of credit risk capital. This was achieved. Another key factor was to safeguard the reputation of the financial group as all direct competitors were concurrently developing solutions.
Our approach
We created and successfully deployed a Basel II roadmap, consisting of 18 Basel programme projects and 30+ cross-functional Basel IT projects. Data requirements were addressed by leveraging and enhancing two (retail, corporate and derivatives) existing enterprise-wide, instrument level, reconciled data marts and their supporting infrastructures. The regulatory capital calculations and reporting requirements were met, respectively, with third party software from Algorithmics and FRS.
Our impact
We helped the bank achieve automated reconciliation created valuable finance capacity, while also improving RWA accuracy – supported and substantiated and measurable results.The calculation and reporting of regulatory capital, under the new framework, was delivered on schedule and within budget.While driven by compliance requirements, some important business benefits were also generated. An increased number of automated reconciled instrument level feeds of both balance sheet and off-balance sheet items were consolidated into a centralised client level data repository, facilitating insights into the domains of risk, capital and profitability management. This improved the accuracy of borrower and facility risk assessments with new validation processes and more accurate risk based pricing tightly coupled to borrower and facility risk.
