Counterparty risk solution of the year: Moody’s Analytics

Asia Risk Awards 2021

Thanh Ha Ngo, Moody's Analytics

Moody’s Analytics clinches the counterparty risk solution of the year for two market-leading software products: RiskAuthority; and the Banking Cloud Credit Risk engine. Both solutions help ensure that the firm’s bank customers are fully in compliance with current and upcoming regulatory capital requirements.

The solutions cover a multitude of regulations, including the latest Basel Committee on Banking Supervision standards and European Banking Authority capital requirements regulations, as well as the national rules from banks’ domestic supervisors. With predefined regulatory rules and reporting templates for different jurisdictions, the Moody’s Analytics solutions enable the firm’s clients to compute, report and perform parallel runs on their risk-weighted asset numbers, using standardised and internal ratings-based (IRB) approaches for various asset classes.

Explaining what makes its counterparty risk solutions so effective for banking clients, Thanh Ha Ngo, senior director of product management at Moody’s Analytics, says: “Clients can estimate their counterparty credit risk exposure to comply with the latest standardised approach to counterparty credit risk [SA-CCR] regulation and previous current exposure method [CEM], the capital requirement for securities financing transactions and the capital charge for credit valuation adjustment [CVA], assess concentration risk, and identify large exposures to be reported.”

Moody’s Analytics’ counterparty risk solutions produce Basel II and III reports for over 50 different jurisdictions, covering more than 3,000 reports, and are used by clients for their credit, market, liquidity and operational risk calculations, as well as for calculation of consolidated regulatory risk and reporting.

The regulatory compliance solutions are implemented in the cloud, allowing the company to deliver, maintain and revise its regulatory software as needed. Ensuring its software is always up to date with the latest regulatory requirements is a key factor that sets the Moody’s Analytics solutions apart in the market, and it does so in a quick and cost-effective manner.

Different solutions

The Banking Cloud Credit Risk calculation and reporting engine helps clients to streamline their regulatory capital compliance processes. The RiskAuthority solution supports the growing focus on standardised approaches to credit, operational and market risk, with embedded data management and reporting capabilities. The Counterparty Credit Risk solution provides specific analytics for SA-CCR, CEM and CVA, among others, and is fully integrated with the RiskAuthority and banking cloud products, providing clients with an end-to-end calculation and reporting experience.

Ngo further explains that “within the same environment, the software is enhanced with multiple sets of calculation parameters to adapt the calculations to more than 50 local regulations for global financial institutions, which is kept up to date by our teams of subject matter experts and product managers”.

The software is enhanced with multiple sets of calculation parameters to adapt the calculations to more than 50 local regulations for global financial institutions, which is kept up to date by our teams

Thanh Ha Ngo, Moody’s Analytics

The Moody’s Analytics platform relieves its clients of IT and technical issues, as solutions are delivered, maintained and updated regularly over the cloud.

Ngo notes: “With our solutions, customers are always current in complying with the latest version of their local regulations. Thus, they can redirect their internal resources to improve the quality of the data they submit and generate more effective analytics and reports using our solution. They can be confident in meeting regulatory deadlines, managing their risk, and making better, faster business decisions.”

One of the biggest challenges to Moody’s clients is to manage the ever-changing regulatory compliance environment in which they operate, and so banks are constantly looking for solutions that help them keep up with the pace of these changes, while also reducing the implementation burden. Solutions need to enable users to keep their costs down for their IT and infrastructure, allow for faster solution upgrades, faster delivery of regulatory updates, improved performance calculation, better data security, and reduced reliance on any third-party vendors.

Ngo says: “Clients also need to manage the complexity of financial instruments and new regulatory requirements in a limited timeframe. The required data may also take time to be produced, [hence] the need for high-performance calculations.”

Moody’s Analytics continues to add further capabilities and enhancements to its counterparty risk solutions, especially relating to Basel regulations. With the finalised Basel III, its regulatory capital solution is set to be enhanced with new regulatory functionalities, such as a revised standardised approach for credit risk, revised IRB approach for credit risk and revised exposure formula for securities financing transactions under a master netting agreement.