Business Challenge

One of the largest private-sector banks in Jordan, with an asset base of US$ 6.0 billion and a presence in numerous countries, either through 100% subsidiaries or by way of joint ventures, wished to implement a solution for facilitating regulatory capital calculation and reporting, in the prescribed regulatory format of applicable jurisdictions, as stipulated in the Standardized Approach of the Basel II guideline

Aptivaa Consulting was chosen to implement their proprietary RWA Engine (called ReCAP - Regulatory CAPital Calculation) for Basel II compliance under the Standardized Approach.

Our Approach

Aptivaa analysed the current state of the bank and identified the key challenges involved in the project. The key issues were to map the data from the various source systems used in different countries / subsidiaries / branches and enable home-host issues to be addressed in a comprehensive manner and to the satisfaction of the home regulator.

A detailed business analysis, data analysis and mapping exercise were conducted. Simultaneously, the infrastructure requirements in terms of both hardware and software environments were stipulated to deliver the optimum performance. We also performed data validation and quality checks to ensure that data loading into the system was correct.

The Aptivaa team consisted of business, techno-functional and technical consultants. Since the implementation was for a multi-country client, each of the above steps was carried for each of the locations and then consolidated at the Head Office.

Our team was involved in setting up the infrastructure required for the platform, getting the data to the staging area and then configuring the RWA Engine. This stage involved the business analysts from risk management, finance and compliance from the bank. Our domain and functional expertise enabled the bank to understand the key issues w.r.t. consolidation of capital, defining capital tiers, home-host issues pertaining to definition of claims, recognition of collateral, credit risk mitigation, use of external ratings, and so on.

The project was performed over a period of 12 weeks for the entire engine implementation, including development of prescribed regulatory reporting systems and user acceptance testing.

Business Benefits

The RWA Engine implementation enabled the bank to comply with its regulatory requirements and also enabled Senior Management to initiate various risk management related policies, procedures and changes in the IT source systems. The regulatory reports indicated that the bank's Capital Adequacy under the Standardized Approach was much less than required by Basel I.

Some key benefits include:

• Compliance with Basel II guideline as specified by regulators in various jurisdictions;
• Transparency in RWA calculations providing for complete drill-down capability through various calculation integers, coupled with audit trail of all details of any approved capital calculation. This helps in periodic regulatory review and subsequent approvals;
• Separate installations were possible which effectively reduced time for complex data transformation (ETL) on a consolidated basis, which otherwise would require high maintenance and change management considering intra banking and / or regulatory developments;
• Facility for proactive and prudent regulatory capital usage management using \What if Analysis\;
• Less turn-around time for change management, i.e. both business and IT.