With a focus on credit risk, the Australian Prudential Regulation Authority is revising the APRA Prudential Standard APS 220 to make the classification of credit exposures consistent with the updates planned under Basel III – often referred to as ‘Basel IV’. Under APRA Prudential Standard APS 220, authorized deposit-taking institutions (ADIs) must set a strategy that reflects their credit risk appetite and profile and maintain policies and processes for controlling or mitigating credit risk over the full credit lifecycle. The Standard also covers such areas as:
In line with the global adoption of Basel IV, APRA is introducing an intricate credit-risk framework. Based on the draft version of the Standard, locally incorporated ADIs will need to calculate RWAs.
With reporting starting in April 2022, ADIs face a daunting task. They need to attain the necessary granular loan-level data and update their systems to perform the required calculations while taking into consideration the Basel credit risk framework, IFRS 9 movement attribution, and deal-level reporting with end-to-end traceability.
Under the Standard, APRA requires ADIs to report credit-risk RWAs together with IFRS 9 ECL movements across similar reporting dimensions.
To comply, ADIs aggressively and strategically need to de-silo their risk and finance data and change their practices related to credit-risk management and reporting by: collecting larger volumes of data, increasing data granulation, sourcing and streamlining data definitions; and boosting the transparency of their calculations and traceability of their data.
Seamlessly ingests large volumes of granular data without transformation
Via the CapitalView data dictionary – Australia edition, accommodates APRA’s validation and calculation rules
Aggregates cross-functionally with detailed views on multiple criteria
Exposes complex RWA and ECL calculation and movement outputs at each step
Enables flexible model management and execution, scenario analysis, and stress testing
Complies with APRA Connect submission requirements
Multiple entry points enable users to flexibly align with their APS 220 evolution. ADIs already using AxiomSL’s IFRS 9 solution will be able to accelerate their APS 220 solution implementation.
Sets a foundation for ADIs to strategically transition from Basel III to Basel IV.
Enables seamless ingestion of high volumes of original granular source data from upstream systems for IFRS 9 and credit RWA calculations without need of transformation.
The extensible CapitalView data dictionary architecture – Australia edition – easily accommodates client’s data.
Enables full end-to-end traceability from the source to the cells on reports. Complete data lineage enables compliance with APRA’s data quality standard RPG 702.
Process steps, business rules, and calculation logic are codified with visible regulatory rule references.
Business and IT can adjust logic preserved in shorthand and configure business rules and calculation nuances.
Controls and permissions are found at every level, including configurable record-level data permissions.
Ubiquitous data and rule drilldown allow granular inspection. Dashboards and custom reporting on calculation outputs enable monitoring and transparent analysis.
Delivers submission histories, daily point-in-time datasets, and lineage for required compliance and audit defense.
Secure, scalable RegCloud provides a fully managed service that ensures ADIs have the latest regulatory rules and software.
Eliminates technology infrastructure burdens, enables operational efficiency, and reduces total cost of ownership (TCO).
Automates credit-risk RWA, ECL calculation, and full APS 220 compliance on a single data-driven analytics platform
Delivers powerful analytics, full drilldown, and data lineage for required compliance, audit defense, and strategic decisioning
Enables typically siloed risk and finance functions to collaborate easily with transparency
Positions ADIs to optimize capital allocation, resulting in greater capital savings across all risk types
Scales to meet granular data, calculation, and reporting processes across global Basel and jurisdiction-specific requirements
Offers modular flexibility to consistently implement emerging Basel IV requirements such as FRTB and CVA
An Exploratory Series – Part One By: Gavin Pugh, Head of APAC Risk Solutions, AxiomSL...
By: Jessica Qiu, Vice President, Client Engagement and Su Jean Song, Product Manager, AxiomSL Australia...
The expansion of Basel requirements involves more than a simple finalization of Basel III reforms.
Do we have the data, processes, and systems we need to efficiently calculate Basel IV credit risk RWA and IFRS 9 ECL and movement?
Can we easily attribute the movement in loss provisions to appropriate parameters?
Do we have adequate data and process controls with clear lineage from source to process to results?
Is our data granularity sufficient to fulfil deal-level reporting via APRA Connect and to draw insights on our capital health?
Do we have a flexible framework for CRM allocation to optimize credit risk RWA/capital?
Can we promptly apply new/evolving asset classes, industry classifications, and risk weights?
Digging Deeper Into The Strategic Framework Of APS 220 – A Radical Change For ADIs
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