eFrame® for Banking Basel III Stress Testing
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Transcript of eFrame® for Banking Basel III Stress Testing
eFrame® for Banking Basel III Stress Testing One-CliCk StreSS teSting fOr BaSel iii COmplianCe
www.secondfloor.com
eFrame® for Banking Basel III Stress Testing One-CliCk StreSS teSting fOr BaSel iii COmplianCe
The importance of stress testingStress testing is becoming an
increasingly important risk management tool in the banking industry and a critical capability for Basel III compliance. A comprehensive stress test can reveal the resilience of organisations, business units and portfolios towards potential crisis – and uncover areas for action and improvement.
It’s also an increasingly important exercise for regulatory supervisors who need to monitor the strength of the banking system as a whole. The European Banking Authority is requesting stress testing reports on a more regular basis, putting pressure on banks to ensure they have a robust, well-documented and organisation-wide stress testing infrastructure in place.
Stress testing challengesHowever, implementing a standardised stress testing process across a large and diverse banking
organisation is easier said than done. In reality, banks come up against several major challenges when trying to conduct a comprehensive stress test, including:
• Businesscomplexity – a typical large bank will deal in many different products, portfolios and asset classes, with heavily siloed approaches to risk. The assumptions and calculations applied in one area during a stress test may not be the same as those applied to another, making it difficult to get an accurate, overall view of risk exposure
• Manualeffort – a huge amount of time and effort is spent in locating, collecting, validating and reconciling the relevant data, taking valuable resources away from the business
• ITcosts– the cost of implementing some technological solutions for data aggregation,
analysis and reporting, such as a firm-wide data warehouse or GRC suite, can be significant
• Repeatability– the production of a stress test report tends to be a manual, ad-hoc effort, with no automated process for ensuring it is done the same way every time –
making it hard to assess the cumulative effect of risk management adjustments
• Dataqualityandintegrity– when data and calculations are being consolidated from multiple business units and legal entities, there’s poor insight into where the data came from or who signed it off, undermining management confidence in its quality and integrity
eFrame® offers major benefits to banking institutions looking to standardise and automate stress testing for improved regulatory compliance and a more strategic approach to risk management.
A dedicated framework for group-wide stress testingKey features of eFrame® for Banking
Basel III Stress Testing include:
• Asingleframeworkto orchestrate stress testing across multiple hierarchies, supervisory jurisdictions, legal entities, business units, products, portfolios and asset classes
• Automation, reducing the time and effort needed to run a stress test, validate the results and consolidate them into a single report for the regulator or senior management
• Arepeatableprocess enabling the test to be re-run at any time using the same assumptions tand scenarios, allowing the impact of risk adjustments to be accurately assessed
• Astandardisedapproach that incorporates a standard definition of processes and procedures, which enables financial institutions to apply a sound stress testing methodology across the business
• Encompassesalltypesofriskexposure(Credit Risk, Market Risk, Liquidity, etc.), the standard definitions will be aligned with a firm’s existing methodologies and systems by SecondFloor’s expert consultants
• Transparentincorporationofexistingriskmodels, avoiding the cost and effort associated with developing new or stress test-specific risk models
• Comprehensiveworkflow and approval process ensuring that all data and calculations are submitted and validated by the correct, designated individuals, and within the report deadline
• Afullaudittrailof all the data, calculations and individual actions contributing to the final stress test report
• Astandardised,automated,documentedandauditableprocess for firm-wide stress testing, producing accurate reports that regulators and senior management can trust
BenefitseFrame® for Banking Basel III Stress Testing is a software solution that creates a single platform for firm-wide stress test reporting. In doing so, it enables an orchestrated, repeatable approach to stress testing at solo and group level, providing firm-wide confidence in the face of complexity.
With eFrame®, risk executives can quickly implement and enforce a firm-wide process and framework for automated, auditable and consistent stress tests.
eFrame®For Banking Basel III Stress Testing
PROCESSCONTROL &
AUDITABILITY
TIME WINDOW DRIVEN
REPORTING
Stress Test Actuals vs Appetite
Calculators
Scenarios/Risk factors
Model parameters
Narratives
Data
Data
Assets & Liabilities
Collaterals & Exposures
Counterparty ratings
Operational losses
Financial data
Corep
Liquidity ratios
Expected loss = PD x LGD x EAD
Capital requirement
Consolidation
Capital calculation
Finrep
Other
Capital
Liquidity
Reporting
Calculators
Value at Risk
eFrame® creates a firm-wide platform for regular stress testing at the click of a mouse.
One-ClICk STreSS TeSTIng
Once implemented, firm-wide stress tests can be run in eFrame® with just one click – rather than spending hours or days collecting, collating and reconciling individual reports.
DATAFlOw VISuAlISATIOn With Analyzer, an optional eFrame® accelerator, firms can improve governance, auditability and Basel III compliance by visualising the flow of stress test data from its source to the final report, and also mapping all the systems and processes involved. This can provide a valuable ‘as-is’ view for those looking to make a start on improving the way stress tests are managed.
POwerFul rePOrTIng CAPABIlITIeS
eFrame® offers three styles of reporting that help firms meet regulatory and management requests
for stress testing:
• Standardreports:eFrame® comes with a suite of standard, out-of-the-box reports, based on common internal and external requirements
• Customreports:SecondFloor consultants can implement additional custom reports
• Ad-hocreporting:eFrame® enables users to run ad-hoc queries against the underlying data to meet one-off information requests
AuDITABIlITy
Every eFrame® implementation includes data historization, backtesting, and full audit trails as standard.
wOrkS wITh exISTIng SySTemS
eFrame® works with a firm’s existing IT environment, including risk models and calculation systems, integrating data from multiple sources to create an enterprise-wide platform for stress test reporting. It doesn’t replace any existing systems, so it can be implemented without disrupting business.
Solution implementationsSecondFloor consultants follow a standard process when implementing eFrame®, so you know upfront how long the project will take, what it will involve, and how much it will cost. Contact us on [email protected] to request a personal demo or to discuss your particular requirements.
Find out moreTo learn more about how eFrame® can help introduce an efficient, repeatable, firm-wide process for stress test reporting,
contact us on +31 88 26 35 463
email us at [email protected]
or visit our website at www.secondfloor.com
Keyfeatures• Powerful reporting solution for assessing
portfolio developments under stress
• Sensitivity analysis and calibration functionality
• Integration with existing IT systems
Keybenefits• Significantly reduce the time, cost and effort
to answer internal and regulatory requests
• Reports that senior management can rely on
• Accelerate and strengthen Basel III compliance
• Fully traceable and auditable
For more details please contact SecondFloor.
AboutSecondFloorSecondFloor helps firms to comply and produce regulatory information efficiently, consistently. Companies that turn to SecondFloor’ solutions benefit from timely, complete, accurate, traceable, auditable and repeatable reports and analytics. Facilitating stress testing, economic capital calculations, and regulatory reporting in complex environments are key elements of SecondFloor’s credentials that have established it as a successful enabler of business analytics. eFrame®, SecondFloor’s software application, reflects best practice approaches and project accelerators learned with clients during years of experience. SecondFloor is also an IBM risk analytics reseller.
RequestafulldemonstrationWould you like to have a personalized demonstration of the eFrame® for Banking Basel III Stress Testing solution? Please contact us at [email protected] or simply visit www.secondfloor.com