SA-CCR: Are you getting the most out of your impact analysis?

AxiomSL | SA-CCR: Are you getting the most out of your impact analysis?

May 14, 2015 – By Kassi Assamoi, Senior Manager, Regulatory Analysis, EMEA

Implementing the Basel Committee on Banking Supervision’s (BCBS) standardized approach for measuring counterparty credit risk (SA-CCR) is a major undertaking for banks. Unfortunately, the job is being made more challenging for many banks because they are unable to do their impact analysis work within their regulatory calculation and reporting platform.

The introduction of a major change like SA-CCR follows a familiar pattern. Banks spend hundreds of man-hours interpreting the new requirements, analyzing what data is needed, whether it is currently available and, if not, how they can capture it. They run preliminary versions of the regulatory calculations; analyze how the new regulation is likely to affect their capital requirements; and then decide whether they need to change their trading strategy or business model in order to minimize the impact.

The logical place to do all of this impact analysis work is within the platform that will be used to run the calculations and produce the required reports when the finalized regulation comes in force. However, many banks are being prevented from doing this because their platform is not flexible enough. As a result, they are being forced to rely on manual workarounds outside their platform.

Using ad-hoc, manual processes is an inefficient way to approach regulatory impact analysis. It means that when the final requirements are published, banks must spend many months reconfiguring their regulatory platforms, implementing the changes they have worked out manually. This roundabout approach makes it more challenging to meet the regulator’s deadlines.

When a bank invests in a strategic regulatory calculation and reporting platform, it should ensure the system will also support its impact analysis work. A bank should be able to implement proposed new regulatory calculations in its platform quickly and then run the calculations using data that is already in the platform. By doing this, the bank will be able to more easily and accurately compare the results of the existing and new calculations.

The platform a bank leverages should archive the logic it uses to implement draft calculations. This will mean the bank will already have much of the groundwork saved in its platform and will be able to move quickly from the impact analysis to production of the final results, when the regulation comes into force.

A bank’s ability to prepare for a regulatory change like SA-CCR also depends on their vendor providing the required calculations quickly. Many banks have been prevented from running their impact analysis within their regulatory platform because their vendor is slow to deliver the required calculations – leaving banks with no choice but to run the calculations manually.

For too long, life has been made difficult for banks because they have a platform that does not support their regulatory impact analysis work and their vendor is slow to supply the calculations they need. As they prepare for SA-CCR, now is the time for banks to address these shortcomings and ensure they get the most out of their impact analysis work.

To discuss this article further, please contact:

emea@axiomsl.com