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PwC
Agenda
10h45 – 11h00 Welcome and introduction
11h00 – 11h30 FINREP 2.0 - The new ECB Supervisory Reporting
Olivier Delbrouck - Director
11h30 – 12h00 Internal Liquidity Adequacy Assessment Process (ILAAP)
Jean-Philippe Maes - Director
12h00 – 12h30 Principles for effective risk data aggregation and risk reporting as per BCBS (Basel Committee on Banking Supervision) 239 paper: What are the challenges for banks?
Sami El Euch - Director
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FINREP - Actual reporting requirements
CSSF Circular 14/593 as amended by the CSSF Circular 15/613
(published on 27 October 2014)
• Stand alone and consolidated reporting need to be distinguished.
Stand alone reporting Consolidated reporting
Partially in the scope of the CRR 575/2013
In scope of the CRR 575/2013
CSSF requirements still applicable*
* Tables B1.1, B1.6, B2.1 and B2.5 (including new reporting concerning “Forbearance and non-performing exposures” (CRR - Art. 199(4))
Requirements of the Regulation 680/2014 are applicable
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Complexity
Full supervisory financial reporting (Full FINREP)
Simplified supervisory financial reporting
Over-simplified supervisory financial reporting
Supervisory financial reporting data points
The extent of reporting depends on the following factors:
• Significant vs. less significant institutions
• Stand-alone institutions vs. separate parents/subsidiaries, SSM vs. non-SSM
• Total asset thresholds of EUR 3 billion
FINREP - Future reporting requirements ECB Regulation 2015/534 of 17 March 2015
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Significant (sub)group or entity for the ECB Regulation 2015/534 of 17 March 2015
Definition from the SSM Framework Regulation (ECB Regulations 468/2014 and 1024/2013)
A credit institution or financial holding company or mixed financial holding company shall not be considered less significant if:
• Total assets > 30 billion EUR or
• Total assets > 20% of GDP and > 5 billion EUR or
• Significant relevance with regard to the domestic economy as per NCA or
• Significant relevance as per ECB or
• Public financial assistance has been requested or received directly from the EFSF or the ESM
FINREP - Future reporting requirements
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FINREP - Future reporting requirements - (Sub)group
Already applicable 30 June 2017
Full FINREP Data points
Significant SSM (sub)group
Simplified reporting
Entry into force
Less-significant SSM (sub)group
Assets > EUR 3 bio or
Consolidation under IFRS
Assets < EUR 3 bio and
Consolidation under Lux GAAP
N/A
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FINREP - Future reporting requirements - Standalone
31 December 2015 30 June 2017 30 June 2016
Full FINREP Simplified reporting
Entry into force
Significant SSM entity
Not included in a SSM (sub)group
Over-simplified reporting
Not included in a significant
SSM (sub)group
Included in a significant SSM
(sub)group
Less-significant SSM entity
Assets > EUR 3 bio
Assets < EUR 3 bio
Data points
Assets > EUR 3 bio
Included in a less-significant SSM (sub)group
Assets < EUR 3 bio
Data points
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31 December 2015 30 June 2016
Full FINREP None
Significant branch of non-SSM bank
Over-simplified reporting
Entry into force
Non-SSM subsidiaries of significant SSM (sub)group
N/A
Assets > EUR 3 bio Assets < EUR 3 bio Assets > EUR 3 bio Assets < EUR 3 bio
Less-significant branch of non-SSM bank
Simplified reporting None
N/A 30 June 2017
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FINREP - Future reporting requirements -
Branch/Subsidiaries
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FINREP - Reporting templates
Over-simplified + Simplified + Full FINREP
Full FINREP All reportings Simplified + Full FINREP
Part 2 Quarterly Reporting (if above thresholds)
Part 1 Quarterly Reporting
Breakdown of financial assets by instrument and by
counterparty sector (4)
Statement of comprehensive
income (3)
Assets (1.1 )
Liabilities (1.2)
Statement of profit or loss
(2)
Equity (1.3)
Breakdown of loans and advances by
product (5)
Breakdown of loans and advances to non-financial corporations
by NACE codes (6)
Financial assets subject to impairment
that are past due or impaired
(7)
Breakdown of financial liabilities
(8)
Loan commitments, financial guarantees
and other commitments given
(9.1)
Derivatives – Trading (10)
Derivatives – Hedge Accounting
(11)
Movements in allowances for credit
losses and impair-ment of equity
instruments (12)
Collateral and guarantees received
(13)
Fair value hierarchy: financial instruments
at fair value (14)
Derecognition and financial liabilities
associated with transferred financial
assets (15)
Some breakdown of selected statement of
profit or loss items (16.1 and 16.3)
Forborne exposures (19)
Reconciliation between accounting and CRR scope of
consolidation (17)
Performing and non-performing exposures
(18)
Tangible assets and intangible assets: assets subject to operating lease
(21)
Asset management, custody and other service functions
(22)
Some geographical Breakdown
(20.1 to 20.3 and 20.7)
Loan commitments, financial guarantees
and other commitments received
(9.2)
Some breakdown of selected statement of
profit or loss items (16.2 and 16.4 to 16.7)
Some geographical Breakdown
(20.4 to 20.6)
Part 3 Semi-annually Reporting
Part 4 Annually Reporting
Group structure by entity (40.1)
Off-balance sheet activities: interests in
unconsolidated structured entities
(30)
Related parties (31)
Group structure by entity (40.1)
Group structure by instrument (40.2)
Fair value (41)
Tangible and intangible assets:
carrying amount by measurement method
(42)
Provisions (43)
Defined benefit plans and employee benefits
(44)
Breakdown of selected items of statement of
profit or loss (45)
Statement of changes in equity
(46)
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SSM (Single Supervisory Mechanism), a new supervisory mechanism for liquidity
SSM countries
According to significance criteria:
Balance sheet total > €30 bn.
Balance sheet total > 20% of member state’s GDP
Significance of cross-border activities
Requested/received public financial assistance (EFSF / ESM)
If one of 3 most significant banks in country
Supervisory jurisdiction of SSM
Significant Banks (120+)
Less –Significant
Banks (~4.000)
Classification By ECB
└ If SBs does not meet significance criteria in 3 consecutive calendar years direct supervision handed to responsible NCA
└ If LSBs meets any of the significance criteria direct supervision by SSM
€ ECB
DGs I - II Direct
Supervision
NCA
€
ECB DG III Oversight
NCAs Direct
Supervision
Countries with an ILAA(P)
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SSM
SREP
The ILAAP is one of the components of the SREP framework, on which relies the SSM
ILAAP
Single Supervisory Mechanism European banks liquidity supervisory framework granting the ECB a supervisory role, initiated in November 2014
Supervisory Review and Evaluation Process Comprehensive assessment of banks’ viability, within the SSM
Internal Liquidity Adequacy Assessment Process Assessment of liquidity and funding management in normal and stressed conditions conducted by banks themselves
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The ILAAP, a key pillar of the SREP framework
The SREP aims to form a comprehensive, holistic view on the risk profile and viability of the institution in order to steer the SSM supervision scope, frequency and intensity and to define early intervention measures to address concerns if necessary.
Main SREP components
SREP outcomes
Categorisation of institutions
Monitoring of key indicators
Business Model AnalysisAssessment of internal
governance and institution-wide controls
Assessment of risk capital
Assessment of inherent risks and controls
Stress testing
Capital adequacy assessment
Assessment of risks to liquidity and funding
Supervisory Measures
Assessment of risks to liquidity and funding
Stress testing
Liquidity adequacy assessment
Quantitative capital measures Quantitative liquidity measures Other supervisory measures
Early intervention measures
Overall SREP assessment
Liquidity & funding risk within the
SREP
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SREP liquidity assessment framework: Overview
ILAAP Process
Assessment of inherent liquidity Risk
Assessment of inherent funding risk
Assessment of risk management and controls
Assessment of liquidity adequacy
Quantitative and qualitative assessment of the short and medium term liquidity risk and the quality of assets that should be held by the institution to meet its liquidity needs under normal and stressed conditions
Deal with the assessment of the funding risk with a focus on the funding plan and funding instruments. Their ability to allow the institution to meet its obligations, as well as their diversity and stability under normal and stressed conditions will be assessed.
Assessment of the liquidity and funding risks management frameworks including related policies, procedures and their implementation and whether an appropriate level of liquid assets is provisioned to cover these risks in case of an adverse event.
Definition whether the Bank retains a sufficient level of own funds to cover its risks, current or future, in normal and stressed conditions, or if corrective measures are required. This dimension assesses the reliability of methodologies used.
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What are the objectives of an ILAAP?
ILAAP
Board Awareness
Documentation of the
overall liquidity
framework
Liquidity Adequacy
An ILAAP is an Internal Liquidity Adequacy Assessment Process.
It is a process that aims for Board awareness of the overall liquidity risk framework and that concludes regarding the bank’s liquid resources adequacy.
It has three main objectives:
• Board awareness: information to the Board of liquidity management framework, and the liquid resources adequacy.
• Liquid Resources Adequacy: assess the liquidity needs and the available liquidity in business as usual as well as in stress situations.
• Documentation of the overall liquidity framework: demonstrate the robustness and comprehensiveness of the liquidity risk framework (identification, management, measurement, mitigation and reporting).
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SREP liquidity assessment framework: Overview A bank should establish a robust ILAAP process, supported by an adequate liquidity risk
management framework, that ensures it maintains sufficient liquidity, including a cushion of unencumbered, high quality liquid assets, to withstand a range of stress events, including those involving the loss or impairment of both unsecured and secured funding sources.
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A good ILAAP answers these questions:
Can your firm survive within its Risk Appetite?
Can your firm survive the prescribed stresses?
Can your firm survive its own extreme but plausible stresses?
Is the Liquid Asset Buffer appropriate for the business model in all circumstances?
What are you using to measure monitor and control liquidity risk taking across your firm?
Can your business grow within the Risk Appetite?
What sets of circumstances can your firm not survive?
Does your Contingency Funding Plan provide for a comfortable funding source diversification to withstand a market stress ?
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Illustration - ILAAP documentation Plan
• Executive summary
• Background: business model, current and future liquidity position
• Governance Structure
• Risk Tolerance
• Organisation
• Risk identification (intraday, FX, ST liquidity, MLT Funding…)
• Liquidity risk management framework:
o Overall approach to managing liquidity risk
o Measurement (regulatory and internal indicators) and Limits
o Mitigation techniques
• Contingency Funding Plan (‘CFP’) or ‘Liquidity Recovery Plans’:
o Roles and responsibilities
o Invocation procedures
o Management actions
• Stress testing:
o Regulatory stress test
o Internal / bespoke stress tests
• Conclusion regarding Adequacy
Expected ILAAP Documentation Plan
A key deliverable of an ILAAP is the report aimed at the Board, that presents the overall liquidity risk framework and concludes regarding the adequacy of the available liquid resources given the institution’s risk profile.
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Contacts
Jean-Philippe Maes PwC Luxembourg Director
2, rue Gerhard Mercator B.P. 1443, L-1014 Luxembourg
Telephone: +352 49 48 48 2874 E-mail: [email protected]
Emmanuelle Henniaux PwC Luxembourg Partner
2, rue Gerhard Mercator B.P. 1443, L-1014 Luxembourg
Telephone: +352 49 48 48 2111 E-mail: [email protected]
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Agenda
Introduction
What’s BCBS 239?
What are the challenges?
How to achieve compliance?
Project interdependencies – ex. AnaCredit
Conclusion
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Introduction
Growing external requirements 1
Growing data expectations 2
Trend towards more detailed Reporting (e.g. FinRep)
Necessary stronger involvement of top management
Sanctions possible in case of significant weaknesses
High data quality for all data elements –“golden source” is key
Requirements for data aggregation capabilities
Data quality management as part of the enterprise strategy
Data governance framework should fit to the size of the entity
Constructive internal control system to meet data quality requirements
Different stakeholders and unclear responsibilities for data elements
Lack of ability to define and measure data quality
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What is BCBS239?
BCBS 239 key objectives:
Enhance the infrastructure
Improve the speed
Facilitate a comprehensive assessment of risk exposures
Reduce the probability and severity of losses
Improve strategic planning
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What is BCBS239?
7. Reporting Accuracy
8. Comprehensiveness
9. Clarity and Usefulness
10. Frequency
11. Distribution
Risk Reporting
1. Governance
2. Data architecture & IT infrastructure
Overarching governance & infrastructure
3. Accuracy & Integrity
4. Completeness
5. Timeliness
6. Adaptability
Risk Data Aggregation
BCBS 239 Principles
Supervisory review, tools &
cooperation
12. Review
13. Remedial actions and supervisory
measures
14. Home/host cooperation
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What is BCBS239?
Timeline & Current Status as of January 2015
First stock-take questionnaire issued via home regulators
March 2013 BCBS issues paper on risk data aggregation and risk reporting principles
January 2013
G-SIBs submit response to stock-take and provide information on remediation timelines and plans
July 2013
BCBS issues progress report on adoption of the principles
December 2013
Second stock-take questionnaire issued to G-SIBs
March 2014
D-SIBs expected to start complying with BCBS239
From January 2017 Deadline for G-SIBs to achieve BCBS239 compliance
January 2016
Continuing remediation activities and ongoing compliance monitoring
2016/17 onwards
4 November 2014
European Central Bank (ECB) Single Supervisory Mechanism (SSM) start
date
January 2015
BCBS issues progress report on adoption of the principles based o n 2013 & 2014 Stocktaking Survey
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Planning and/or Monitoring
Assessment and/or Review
BCBS 239 - Compliance Planning Challenges
Deliverables A group-wide data governance organisation and set of frameworks and policies that define the overall data governance and management
standards to which all functions and business units must comply – examples:
• Group data vision and strategy
• Data Management policies, processes and tools including:
• Data ownership
• Critical data elements
• Golden sourcing
• Data publication and enrichment policies
• Data quality framework
• Metadata / Master Data Management
A bank-wide data architecture strategy and IT infrastructure to support:
• Global data models and metadata management
• Global Master Data Management
• Resilient infrastructure
Global standards, frameworks, policies and documentation hierarchy for risk data aggregation, including:
• Process documentation
• Critical Risk data elements, owners, and golden sources
• Control framework
• Data quality standards (metrics, materiality / tolerance, etc.)
And risk reporting, including:
• Risk reports inventory
• Standardised risk reporting practices and governance
• Explicit requirements (e.g. timeliness, accuracy) and consistent adoption of core risk metrics
• Appropriate balance of risk data, analysis and interpretation
• Ensure packs are meaningful and appropriately tailored to the needs of recipients
Specific remediation projects within risk areas and business units to improve the underlying technology infrastructure and architecture to support
data aggregation and reporting:
• Reduced reliance on manual aggregation processes
• Appropriate controls over timeliness, completeness, and accuracy
• Flexible risk data aggregation capability and customisable reporting tools
• Alignment between Risk and Finance
Principle 1 Governance
…
Principle 11. Distribution
Principles Question 1
Question 2
Question 3
…
…
Question i
…
…
Questions Requirement 1
Requirement 2
Requirement 3
…
…
…
…
…
…
Requirement j
…
Requirements
Data Governance and Management
Data Integration & Infrastructure
Specific remediation projects
Risk Standards and Processes
Programmes
From Principles to Planning
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Taxonomies and common definitions in place
Data Quality and Consistency measured and monitored
Clear ownership of critical data items
Golden Sources identified and enforced
Meta-data captured
DATA
LIFECYCLE
Risk Standards and “Golden Rules” defined and enforced across risk areas and
material entities
Reporting processes (use of data) can be shown to be
compliant with standards
Aggregation processes (to a group-wide view) are subjected
to the standards
RISK STANDARDS
and PROCESSES
Policies, procedures, and controls defined and enforced
Independent validation process in place
Escalation channels identified and implemented
Evidence of clear remediation mechanisms
Board and Senior Management involvement
GOVERNANCE and
CONTROL
Elimination of reliance on manual aggregation and
reporting methods
Automation of controls
Capability to enforce controls and standards
Automated reporting of key risk information at
group-wide level
Certified data at a legal entity level whilst complying with group-level timeliness and
accuracy standards
INFRASTRUCTURE and
ARCHITECTURE
PwC Capability-based approach to BCBS 239
Capability areas Outcomes
4 pillar BCBS 239 capability framework 32
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Overall BCBS 239 compliance journey for banks
2016 onwards
2015 2014 2013
GSIBs Compliance deadline
Assess and plan 1
1. Assess and plan Build
foundation 2
2. Foundation
Implement solutions 3
3. Solution implementation
Review and monitor compliance programme 4
4. Compliance programme review
Certification framework
5
5. Certification framework
Certify compliance 6
6. Ongoing certification
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Data is the key for several requirements
Data Quality as a
cross-sectional topic
Principles from BCBS 239
transferable to other
regulations and vice versa
Lessons learnt Asset Quality Review
Data
Collection
Aggregation
Reporting
Ownership
BCBS 239
COREP/ FINREP
CRD IV/ CRR
IFRS 9
MiFIR/ MiFID II
EMIR
FATCA LEI
HFT
MaSan
SREP
AnaCredit
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Data is the key for several requirements
Data
Collection
Aggregation
Reporting
Ownership AnaCredit
The ESCB is currently finalising work on a granular credit risk dataset (‘AnaCredit’), and a final decision on AnaCredit is expected this summer. Requirements for transparent, harmonised and granular information on credit granted by credit institutions to financial and non-financial corporations and general government by early 2018. Later stages could achieve a broadening of the scope and user base of AnaCredit.
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AnaCredit: The ECB decision 2014/192/EU on the collection of granular credit data
• Setup of a long-term framework for the collection of granular credit data based on harmonised ECB statistical requirements;
• Creation of granular credit databases operated by all Eurosystem NCBs by the end of 2016;
• Establishment of a common granular credit database across the Eurosystem by the end of 2016.
Core objectives of the ECB
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Banks will have to provide granular credit data to NCBs Data flows between banks and central banks Data use
ESCB
National Central Banks
ECB • Banking supervision • Monetary policy • Evaluation of the entire financial
system
• New statistical information • Enhanced existing statistical
information
Generation of granular credit data from source systems based on: • Predefined selection criteria • Standardised reporting intervals • Fixed format for delivery
Individual international units will have to report granular credit data to their national central bank.
Common granular credit database
National credit databases
NCB NCB NCB
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Final extent and form of data to be delivered is yet to be defined but the preliminary discussion shows a significant amount of data to be reported
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AnaCredit: relevant
data fields Total: 105
Lender
• General information on the lending bank
Borrower
• Name and address of the borrower
• Turnover
• Rating information
• Additional information for private customers
Credit data (“Credit”)
• Balance sheet values
• Information on collateral
• Terms of the loan (interest, maturity)
• Risk classification
• Forbearance
• Impairment
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Overlapping set: approximately 25 - 35 fields
AQR Loan Tape serves as a pilot for granular credit data reporting Comparison of the relevant data items
AnaCredit AQR - Loan Tape
AnaCredit
105 fields (05/2014)
Debtor Tape
20 fields
Facility Tape
22 fields
Collateral Tape
10 fields
52 fields (only Corporate)
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Thank You
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coopérative, its members, employees and agents do not accept or assume any liability,
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to act, in reliance on the information contained in this publication or for any decision based on
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“PwC” refers to PricewaterhouseCoopers, Société coopérative Luxembourg, which is a
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