Author: Julie Duncan

ALM Academy Success

Posted on by Julie Duncan

“Complex topics described very well” M. Lynch, BLME

 

An Overview

The ALM Academy, developed and presented by ALMIS® International, successfully launched its first seminar on Thursday 27th March 2014. This series of high-level seminars has been specifically developed for directors, senior banking executives and members of a bank or building society ALCO to address key areas of ALM with a focus on the principals and strategic implications of the latest CRD IV regulations.

Our enthusiastic and knowledgeable delegates fully engaged in the interactive programme of workshops, discussions and the sharing of ideas under Chatham House rules. Delegates agreed that limiting the number of participants to 16 enabled more productive discussion and in-depth analysis of the issues.

 

The Delegate Experience

Overall feedback was very positive with 90% of the delegates agreeing that the content was informative, well presented and highly relevant. In particular, the use of case studies proved to be a very effective mechanism for understanding and applying ALM principals. We have taken on board suggestions for additional case study examples for future seminars. Here are just a few of the comments from the very satisfied inaugural ALM Academy class!

“A very useful day of both presentations and discussions around the key issues” N. Walker, Marsden Building Society

“A good grounding in Capital and Liquidity” R. Hetherington, Buckinghamshire Building Society

“Good overview of everything and deeper on the parts I wanted. Great to have case studies, good balance of difficulty and time.” S. Cotterill, Holmesdale Building Society

“Excellent day” A. Evans, Teachers Building Society

 

Topics Covered

The morning session included an insightful presentation on the overview of ALM under CRD IV as well as an in-depth review of IRRBB coupled with an interactive case study. This highlighted the significant benefits of using an integrated system such as ALMIS® for both ALM and Regulatory Reporting. We also covered analysis on Capital Adequacy under CRD IV with a particular focus on Risk weighted assets and CVA capital requirements.

The afternoon session concentrated on the topical subject of Liquidity management under CRD IV followed by a case study that examined a sample balance sheet for which all participants were asked to calculate ILG, LCR and NSFR.

The day concluded with an insight into Margin Management and FTP followed by discussion of Management framework and best practice.

Expert speakers on the day were Colin Johnson, Gianfranco De Martino, Andrew Capps and Joe Di Rollo. Full speaker profiles and seminar details can be found on our website.

 

Future Seminars

The initial seminar generated significant demand from the banking community throughout the UK. In response we are repeating the March seminar at the following locations:

London – Thursday June 12th 2014, The Grange Hotel St. Pauls, London.

Edinburgh – June 2014 – date and location TBC.

Places are limited so register your interest now by contacting Cecilia Mueller, Business Development Executive or call 0131 452 8898.

Why Synergy matters – getting the best from your ALM and Regulatory Reporting Systems

Posted on by Julie Duncan

 

Back in 1992 when ALMIS® International was founded, spreadsheets were very much the norm for calculating balance sheet risk. The need to do calculations at all was a ‘nice to have’ but certainly not an essential part of managing a Building Society. The regulatory financial landscape has changed considerably since then, both in terms of the technology toolbox now available but also in terms of the need for comprehensive, reliable, auditable and reportable analysis.

Building Societies now need to analyse their financial risk profiles in numerous ways, providing their Executives and Boards with accurate information on current and forward looking positions to help them proactively monitor and plan capital and liquidity requirements, profitability and interest rate risk. Not only is this information crucial for managing a sustainable business model it is now part of a complex regulatory regime. ALMIS® has provided FSA reporting capability since 2010 but with the implementation of CRD IV and the subsequent demands of COREP and FINREP, the advantages of an IT platform for both ALM and Regulatory Reporting are evident.

 

The ALMIS® regulatory reporting module has been extensively developed to include an effective and time saving solution for FSA, COREP, FINREP and BoE reporting providing effective workflow management, validation routines, comparatives and full audit trails to allow for efficient management and full compliance. But all this reporting data can also be used to monitor and manage financial risks and help manage the balance sheet in a forward looking way.

 

The new regulations are placing significant strains on finance and treasury departments in Building Societies. As a result, there is a need to be as efficient as possible in how information is processed and interpreted, together with a requirement for consistency with assumptions and data models used to produce the analysis.

 

Whist some Building Societies have installed a combination of dedicated ALM software for asset liability management and separate regulatory reporting tools, there is a growing trend towards synergy – utilising the same IT platform for both activities. This consolidation of departments and management of regulatory reporting and balance sheet as an integrated activity is proving to be a successful strategy in managing resources and the complexity of data.

 

The reporting needs of prudential regulators and senior management are not so far apart and the detail of the new regulatory reports now required means that the same regulatory data can be used for balance sheet management purposes.

 

So the question even for the very largest Building Societies is, “Why have separate, disconnected products for these activities when they can be effectively delivered in one system”?

 

The advantages of a single system for Balance Sheet Management and Regulatory Reporting:

 

– A single version of the facts

– Increased scrutiny and therefore reliability within a single version

– Consistency of the assumptions applied

– Time savings loading and reconciling data

– Understanding the impact decisions have and the interplay between liquidity and capital, profitability and interest rate risk

– Building both the regulatory and economic requirements into forward plans

With increasing complexity of data, the growing need for proactive future planning and the continual demands of regulation, the adopters of a system that manages, monitors and reports in a fully integrated and auditable way must surely give those Building Societies a distinct advantage.

Liquidity Coverage (LC) Ratio Reporting for CRD IV

Posted on by Julie Duncan

On Tuesday 18th March, ALMIS® International hosted a webinar explaining liquidity reporting under CRD IV and particularly the new liquidity coverage (LC) reports and ratio. This was a popular event and was attended by over 40 ALMIS® banks and building societies. Here’s a summary of what we discussed, together with feedback from our participants.

The Regulatory Perspective

Basel III is a global voluntary regulatory standard on bank capital adequacy, stress testing and liquidity risk. The BIS, under BASEL III, has published for the very first time, a global standard for liquidity management.

Based on this CRD IV includes two liquidity ratios and consequently, the LC return will be the first return to be submitted under COREP – due by 30th April 2014 for March 31st data.

In December 2013 the EBA published new and complex guidance for retail outflows. The PRA has also published some guidance. Whilst the LC ratio will not form part of Pillar 1 until 2015, the new regulations have significant and wide ranging implications for all UK-licenced deposit takers.

How do financial firms and system providers such as ALMIS® International interpret, implement and deliver on these new regulations? Read full article

ALMIS® software gives risk management capability to Paragon and SCOBAN in their quest for a banking licence

Posted on by Julie Duncan

Paragon Bank (part of the FTSE 250 Paragon Group of Companies PLC), was recently granted a banking licence by the Prudential Regulation Authority. The PRA has also confirmed that it is ready to grant a banking licence to SCOBAN plc. A key part of the licence application is for firms to set out their plans for monitoring and managing their own specific financial risk profiles.

 

The UK regulators are known for their high standards and stringent tests for institutions seeking licence approval. Effective risk management is an essential requirement, and one of the main challenges on the road to obtaining a banking licence. By effective use of ALMIS® International’s Asset Liability Management system to assess, manage and monitor risk, the PRA were able to take comfort that both Paragon and SCOBAN have the right tools to successfully demonstrate prudential risk management.

 

Joe Di Rollo, MD and Founder of ALMIS® International, notes: “Our long and collaborative association with the regulatory authorities, including the PRA, has underpinned the development of an ALM risk management system that meets and exceeds the requirements of both the regulators and our clients. Paragon Bank and SCOBAN plc are the latest in a growing number of ALMIS® clients demonstrating that effective use of ALMIS® equips them to challenge established banks with confidence”.

We are 100% confident – are you?

Posted on by Julie Duncan

 

A number of clients have contacted us this week regarding a questionnaire from the PRA over your readiness for COREP.

 

The EBA published the latest Data Point Model and Taxonomy in early December 2013. We have been working on a significant number of material changes to both COREP and FINREP, including changes and additions to the LCR and NSFR returns. This also included entirely new and extensive validations.

 

ALMIS® release schedule

 

We have released an update to capital adequacy and balance sheet reporting in order to automatically calculate a substantial number of COREP and FINREP returns. This release is currently available on our website and is suitable for testing the report calculations and functionality.

 

Next week we are scheduled to release a version update which will include the very latest Taxonomy. We will be testing the XBRL files using a range of sample data with facilities that have been given to us directly by the PRA. This version will give clients all they need to meet the specific regulations, including submission forms for LCR and NSFR.

 

In March we will release V9.6 which includes updates to the liquidity module and an automatic calculation facility for the new LCR and NSFR. It will also have automatic calculation for the new Large Exposures.

 

Clients should note that Our January release will meet the deadlines 3 months in advance of the submission deadlines. This includes automation for the majority but not all returns. Our March release will provide further automation.

 

Our aims and priorities are:

1) To ensure that all of our clients meet the necessary deadlines

2) We provide the ability to streamline and automate these processes going forward

3) We deliver analysis tools to make best use of the management information used to aid decision making

Are you prepared for the implications of the new CRD IV regulations?

Posted on by Julie Duncan

ALMIS® International can provide you with a comprehensive solution to meet the demands of regulatory reporting for COREP and FINREP.

 

ALMIS® International provides a full CRD IV submission system, with the option to calculate reports directly from a firm’s balance sheet. Our system can provide a complete solution to all the requirements of CRD IV and has the flexibility to deliver on specific elements that your organisation requires.

 

The ALMIS® Regulatory Reporting Module provides a fast and flexible method of completing COREP and FINREP reporting, offering both full automatic calculation and spreadsheet integration.

 

Users of the regulatory reporting module have two options:

 

1. Input only option – transforms data held from spreadsheets into XBRL.

2. A full calculation option – produces the reports directly from your source systems.

 

The ALMIS® system has been comprehensively developed and extensively tested, making it a reliable, effective and time saving solution to reporting. ALMIS® is supported by a team of ALM experts and software engineers and is updated to ensure it meets all regulatory changes.

 

The benefits of using the ALMIS® system for regulatory reporting include:

 

  • Reduced pressure on finance department through seamless automation of regulatory returns which are consistent across regulation and ALCO reporting

  • PRA Reporting through XML to the PRA/FCA’s Gabriel System

  • COREP Reporting through XBRL to the PRA/FCA’s Gabriel System

  • Bank of England Reporting using XML to the Bank of England’s OSCA system

  • Easy to use with Audit trails

  • Full validation as is done on the Regulatory Systems, including cross validation between the reports

  • Automatic calculation on totals and listing of calculations on cells

  • Segregation of Editing, Reviewing and Submission roles

 

Our team of ALM experts, software engineers and system integrators understand the changing regulatory landscape and provide a flexible, forward-looking system that enables you to achieve regulatory compliance with minimum disruption to your business.

 

With over 50 banking clients and over 60% of the UK Building Society market, ALMIS® International are a UK market leader for regulatory reporting systems for UK banking firms.

 

For more information on how the ALMIS® solution can work for you, contact Cecilia Mueller on 0131 4528898 or email [email protected]

ALMIS® International – fast to respond to new CVA Risk Calculation for Derivatives

Posted on by Julie Duncan

The latest CRD IV regulations make small changes to risk-weighted credit exposure for banking institutions, except in the area of derivatives where the exposure can now be significantly higher.

With the regulations effective from January 1st 2014, many UK banks are simply not ready to calculate this risk. The calculation is highly complex and can result in significant additional capital requirements as explained in Article 384 of the CRR, 27/06/13.

For example, a 20 year collateralised interest rate swap with one of the large UK clearing banks could result in a capital requirement over 20 times greater than the current regime.

ALMIS® International believe it is the first company to provide its clients with a fully functional CVA risk report. Their client base trust the ALMIS® system to anticipate the regulatory landscape and to respond so quickly and effectively to ensure its users understand the implications and are able to easily comply with changes to the CRD IV regulations.

For more information about how the ALMIS® software can benefit you, contact Cecilia Mueller, Business Development Executive or call +44 (0)131 452 8898

Case Study

Posted on by Julie Duncan

Whilst COREP has been dominating the headlines in terms of changes in the regulatory reporting environment, new Hedge Accounting standards are being introduced for banking firms. Many of our clients can take advantage of having the data already installed and easily slot in the Hedge Accounting module to ensure compliance with the new standard.

 

A recent example of this is with The Cambridge Building Society, for more information click on the link below:

CASE STUDY: “Hedge Accounting In A Day”

 

For further information on the Hedge Accounting Module, click here or contact ALMIS® International.

Updates to the Capital Requirements Directive (CRD) IV

Posted on by Julie Duncan

Our review of the implications

The banking sector is bracing for significant change to regulatory reporting. The European Banking Authority (EBA) has released the ‘Final Draft’ technical standards for COREP and FINREP. This relates directly to the Capital Requirements Regulation released in June this year and contains the templates and validation for CRD IV reporting. This draft has a 3 month consultation period for proposed amendments.

Changes to submission dates

There have been alterations to the dates of the first submissions. Whilst many reports suggested the first submission date would be 30 business days from the 31st of March, the technical standards produced for the EBA state that the monthly reports should be completed 30 calendar days after the 31st. These changes only apply to the first submission. For all monthly reporting after the first submission, a 15 calendar day period will apply.

SME Support – a positive change to help both lenders and SMEs

A reduction in the capital held to cover exposures to small and medium sized enterprises (SMEs) is also implemented in this latest update from the EBA. This is not a change to risk weight but instead a new factor in the calculation of capital holding. This “SME supporting factor” is designed to boost lending to SMEs; therefore any capital gained should ideally be used to lend more to the sector. This change was led by Germany but will have impact across Europe.

The purpose of this change is to remove the impact of the capital conservation buffer for SMEs. The minimum capital requirement is calculated as 8% of the Risk Weighted Exposure (RWE) and the Capital Conservation Buffer is 2.5% of RWE. This means that combined a total of 10.5% is held. The factor is 0.7619 which is equal to 8/10.5. This means in practice, instead of holding 10.5% in total, there is effectively a total of 8% held for SME lending.

ALMIS® caters for this change in its latest release, enabling clients to take full advantage of this change and minimise their capital holding requirements.

Large Exposures

Large Exposures reporting is supplemented with an expected maturity breakdown for any exposures to the counterparty. This means that for large exposures including retail lending there can be a significant volume of calculation to produce the new LE4 and LE5 reports. ALMIS® International are prepared for this change, and ALMIS® already has a maturity analysis tool which clients are successfully using to assist with reporting.

The PRA Response

The Prudential Regulation Authority has released consultations on these new items. It is expected that the PRA will enforce 100% Risk Weighting on Commercial Mortgages and 35% for Buy to Let Mortgages if less than 80% Loan to Value.

In terms of Capital the PRA has voiced the intention for a firm specific capital buffer in addition to the combined CRD IV Buffer constituted of CET1 capital. The impact depends on the proportionality that the PRA impose.

Working to a Solution

These changes to capital calculations and levels of reporting increase the burden of compliance and reporting for banks and building societies. Firms need to understand the impact of these regulations before the implementation date of 1st January 2014.

ALMIS® International provides a full CRD IV submission system, with the option to calculate the reports directly from a firm’s balance sheet. We have a dedicated team of staff working to stay up to date with the changing regulations and to help firms meet their regulatory compliance requirements.

For more information on how the ALMIS® solution can work for you email us or call on 0131 452 8898.

CRD IV – Final Draft Templates Released

Posted on by Julie Duncan

On the 26th July the European Banking Authority released the ‘final draft’ set of templates and validations for CRD IV. This relates directly to the newest and final definition of the CRR which was released in June.

COREP has a number of significantly changed templates from the previous release. The Credit Risk reports now show more detail on the reporting of Small and Medium sized Enterprises (SME) while the Large Exposures reporting now shows an expected maturity profile breakdown as well as reporting the Counterparty information in a new template.

At ALMIS® International we are in the process of updating the internal version of the Data Point Model within the Regulatory Reporting Module. Once this is complete we will release an updated version of the module to all clients. This will include the automatic calculation of reports from the Capital Adequacy Module, and allow population of the new templates.

Please note that while this is the final draft there is a period of 3 months in which changes could be made. Additionally the updated taxonomies which allow correct XBRL generation have not been released yet, these are expected at the end of August. The first submission of COREP will be in April 2014. Firms should be prepared to submit the full XBRL submission at this time.

A Q&A tool is also now available on the EBA website and this should help us all interpret the new requirements.

If you have any questions on ALMIS® and the CRD IV Reporting regime please contact Virginia Hay or Georgina Macleod.