Business Challenge:

The client is one of the largest banks in Canada headquartered in Montreal with assets of 113 billion Canadian Dollars. The client wanted to comply with BASEL II accord for both Standardized and Advance Internal Rating Based (A-IRB) Approach. The bank must comply with BASEL II accord and report to local regulator, on quarterly basis, based on the Standardized and A-IRB Approach. The Bank was supported by Aptivaa in (i) Business Requirements Analysis (ii) Identifying the data requirements and performing data gap analysis (iii) Capital Result Analysis for validation & (iv) Liaison with the bank for generating regulatory reports.

Our Approach

Bank selected Algo Capital Suite "Risk Watch" as a solution, which specializes in credit regulatory capital calculation as defined in Basel Capital Framework. It can be used for both standardized as well as advanced internal rating based approaches. The tool is designed to capture the complexity within a global organization with consideration of regulatory national discretion. Outlined below is the approach adopted by the Aptivaa team towards meeting the aforementioned business requirements.

• Aptivaa did an in depth study (through workshops and discussions with bank officials) of the bank's processes to understand the business requirement for compliance according to the local regulatory authority.
• The step was followed by defining the data requirements and to have a complete understanding of their core banking systems and their capabilities. To ensure a high level data quality an analysis of the input data provided by the bank was also done.
• Reports related to the risk weighted assets (RWA) were generated followed by a quality check to ensure compliance with the regulatory capital calculation guidelines.
• After the report generation Aptivaa worked in liaison with the banks reporting team to ensure proper RWA reporting as per the specified schedules/guidelines of the regulator. Also a reconciliation of the reports was done with general ledger accounts to the sector level exposure.

Business Benefits

The bank became compliant with the Advanced Internal Ratings based approach, the most advanced model for regulatory credit risk capital measurement. As a result of several quality checks and reconciliation exercises for the capital calculated and the subsequent RWA reporting were verified to be in line with the guidelines issued by the local regulator.