Comprehensive Capital Analysis and Review (CCAR) Reporting
Dodd-Frank Act Stress Testing (DFAST) Reporting
Beginning in 2012, the Federal Reserve Board (FRB) mandated that the largest U.S. Bank Holding Companies (BHCs) would have to file a “Comprehensive Capital Analysis and Review” led by stress testing. The stress tests are designed to assess the capital adequacy of large BHCs using forward-looking projections of revenue and losses. The bank list was expanded the following year and now encompasses 30 BHCs. It will expand again in 2015 when foreign banks will lose their exempt status under Supervisory Letter 01-1.
Data collected through the FR Y–14A/Q/M provides the Federal Reserve with the additional information needed to help ensure that large BHCs have strong management process and risk measurement supporting internal assessments of capital adequacy.
Challenges: Data Consolidation and Integration to meet reporting requirements
CCAR is a very complex, data intensive exercise. Retrieving, standardizing and maintaining financial, risk and reference data is the first task. Then, the firm must mix financial and risk data and reference data to be used simultaneously in many of the reports. The reporting burden for firm rises as the FR Y-9C and the CCAR quarterly reports are due at the same time. The Federal Reserve publishes in November its macro variables and expects banks to incorporate them into their models and then use the models for the stress tests the firm must report by January 5. Semi-annual reporting stress reporting may be requested by the FRB.
To meet these regulations, BHC will need a robust regulatory framework combined with a flexible reporting solution. AxiomSL’s comprehensive regulatory reporting solution enables BHC to source, enrich, calculate, analyze, disclose and reconcile data to meet reporting requirements. This solution provides traceability and drilldown capabilities and it is adaptable to quickly meet evolving and new regulations on a centralized platform.
AxiomSL, global leader in regulatory reporting solutions and risk management for over 20 years, provides a dynamic data management framework, which offers flexibility and scalability in consolidating clients’ data while delivering data transformation, calculation and reporting processes transparency. This robust technology addresses current regulatory deadlines while building the foundation for a strategic cost effective long-term regulatory reporting platform.
Complex and evolving requirements for submission
The submissions are quite varied in nature. Some worksheets based on products have a materiality threshold. Some submissions are based on historical data, only. Some simply capture the institution’s address, persons to contact, etc. Several take much of their input from the firm’s FR Y-9C and sub-ledger data. Others require inputs from risk management inasmuch as they incorporate a product’s option risk measures and other sensitivities. The Fed also conducts disruption of market exercises on the product data at randomly selected dates.
With respect to the stress tests, they are dependent on a bank using FRB supplied macro variables, such as US “real GDP growth” or “unemployment rate” to construct models.
The AxiomSL Solution
AxiomSL’s integrated platform has the ability to compute capital adequacy calculations at various levels of granularity and from multiple and diverse sources providing all the steps to comply with regulatory requirements and financial control reporting. It delivers both data integrity and a transparent link between the client’s data source and the standard calculations. AxiomSL’s high performance architecture leverages clients’ existing data structure to quickly and accurately populate the information required to meet reporting accuracy requirements and validation process.
AxiomSL’s integrated solution addresses capital adequacy and margin demands by providing a strategic data management platform which enables financial institutions to:
- Interface with clients’ data structure and workflow process without any data conversion;
- Data Consolidation and Integration – cross-system integration to retrieve and standardize financial, risk, and reference data;
- Management and Audit Requirements:
- Establish Ownership and Sign-Off
- Design Process and Reconciliation Controls;
- Provide variance & Internal analysis;
- Deliver versioning of business rules and calculation methodology.
- Allow for quick implementation;
- Streamline and automate reporting processes;
- Provide cost-effective preparation of regulatory reports for electronic review and submission.
Much of the Federal Reserve’s Comprehensive Capital Adequacy & Review (CCAR) is about demonstrating control, and this is particularly evident in the framework’s core CFO Attestation requirement. This framework introduces a formalized requirement to validate information, implement process controls and provide disclosures. The mandate requires the largest financial institutions to sign off on CCAR-related data accuracy, detail their auditing and escalation processes, and describe other mechanisms scrutinized under the regulation. While most firms already have certain aspects of this process formalized on an institutional level—to complete CCAR reconciliation, primarily—CFOs and their offices require a tailored monitoring layer, which in turn demands fresh innovation from their data management platforms.
AxiomSL’s robust and auditable environment, in line with the CFO attestation principles, provides the controlled framework around data collection, reporting and sign-off. This flexible platform enables CFOs to navigate through data on a granular level and develop their own workflows to reflect the individual institution’s process in a permissioned environment. Combined with the dashboard technology, AxiomSL has the tools needed to provide a holistic CFO attestation solution.
Reconciliation is a central task required by the Federal Reserve’s Comprehensive Capital Adequacy & Review (CCAR). For large and diversified institutions currently covered under CCAR, reconciling information across hundreds of touchpoints can become an onerous process and operational headache without a robust and agile platform. But beyond the traditional matter of ensuring consistency of reportable data, AxiomSL also views effective CCAR reconciliation in an additional way: as a matter of generating meaningful business insights, in addition to simply lining the data up.
AxiomSL’s platform provides a flexible, modular approach to tackling the various aspects of attestation and risk data governance with an integrated workbench for CCAR reconciliation. In fact, AxiomSL’s approach provides detailed reconciliation reports and business rules for analyzing comparable and reconcilable report schedules at the line item level with drilldown to the original source. For example, within the platform are the FR Y-14 vs. FR Y-9C reconciliation reports that work together to allow firms to attest that the FR Y-14A/Q/M, FR Y-9C and any reconcilable reports conform to Fed instructions along with the ability to identify and analyze material errors in data and reporting.
AxiomSL | AMERICAS
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