IFRS 9 enterprise solution of the year
Regulation capital calculation product of the year
Meeting regulatory requirements for calculating capital ratios, including risk‑weighted assets (RWAs), presents a number of significant challenges. AxiomSL provides a platform to address these challenges, starting with the gathering and management of data, and working through the calculation process to the outputs for external and internal reporting.
AxiomSL’s platform supports the seamless integration of client data from disparate sources, preserving the original data and making it constantly accessible and visible. Users are only required to load positions once to increase efficiency and reduce potential errors. Client data is aligned with Basel III asset classification standards, using AxiomSL’s proprietary regulatory-capital data dictionary. Users can apply their own specific business rules and filters throughout the calculation process, which delivers transparent RWA outputs linked directly to all corresponding inputs.
AxiomSL’s regulatory capital calculation approach is flexible, giving clients maximum visibility of their inputs to the calculation process. This enables additional insight and outputs – for example, clients can add look-up reference tables to the calculation inputs to create a table of accounts by country of exposure. The company also recently introduced fully automated filing; by taking the RWA position-level outputs and tagging them to enable automatic connection to the correct line item of report filing schedules, AxiomSL reduces workflow steps and the time it takes to file, while increasing reporting accuracy.Using the same underlying platform, AxiomSL has created an application for International Financial Reporting Standard (IFRS) 9, which addresses all the regulation’s key aspects, from classification and measurement of assets and liabilities, to impairments and disclosures.
AxiomSL’s IFRS 9 application fetches and aggregates the necessary financial, risk and macroeconomic data without duplicating it, while checking its quality. Control features facilitate collaboration between different functions, such as risk and finance, and support sound data governance practices such as Basel Committee on Banking Supervision Standard 239. Once the data has been aggregated, it is pushed through the business rules that determine asset classification and measurement, impairment and disclosures.
Clients can use either AxiomSL, their own or third-party models plugged into the company’s data integration layer to calculate expected credit loss (ECL) at all required levels. Once ECL calculations are completed, disclosures and reporting can be produced in accordance with the IFRS taxonomy, with internal management information reports – as Excel or XBRL exports – or in any other format. Users are able to drill down from any value in the reports to the source data and can make manual adjustments if required, all of which are automatically recorded and reversible. The flexibility of the solution allows users to perform scenario testing and explore the impact of their choices on provisioning levels.
AxiomSL’s experts survey the global regulatory landscape continuously to identify changes to existing rules and capture new regulatory requirements, updating the company’s data dictionary and interpreting the changes into its regulatory capital calculation, IFRS 9 and other applications as necessary. Anticipating the increasing focus by regulators on data lineage, AxiomSL recently added a module to its platform that enables users to track the route of all data points, from their origination to all transformations and uses, drilling down and up.
Alexander Tsigutkin, chief executive of AxiomSL, says: “Leveraging more than 25 years’ experience, AxiomSL combines deep industry expertise with an intelligent data management platform to deliver services around regulatory and risk reporting, liquidity, capital and credit, operations, trade and transactions, and tax analytics. AxiomSL’s collaborative platform is known for its robustness, adaptability, transparency and state-of-the-art data lineage module. The platform, which imposes no constraints on where the data is located, seamlessly integrates clients’ source data from disparate systems. The enterprise‑wide approach enables clients to reduce implementation costs, accelerate time-to-market and deliver trusted information. Enabled with powerful, timely and trusted insights from AxiomSL’s IFRS 9 solution, finance and risk teams can more easily collaborate and more adroitly steer the institution’s financials at all times.”
“AxiomSL’s platform covers a broad range of regulatory capital calculations”
“A thorough and well-thought-through response to IFRS 9 challenges”
“Strong from an enterprise perspective, leveraging the company’s regulation aggregation and reporting resources to provide a good IFRS 9 infrastructure, especially for data management”
In a market where new regulation is emerging from all directions, firms are introducing unnecessary risk by operating with outdated systems and taking a tick‑box approach to compliance. AxiomSL has been on a mission to help firms enhance processes and gain improved insights, and its International Financial Reporting Standard (IFRS) 9 and Basel III offerings have landed it the IFRS 9 enterprise solution and regulation capital calculation product of the year awards at the Risk Technology Awards
As regulators continue to require new measures to strengthen the resilience of the financial system, part of the challenge for firms is a lack of flexibility in existing systems and processes. Firms often run on outdated legacy systems that are difficult to change, and models may be based on black‑box methodologies. Without a robust foundation, firms are at risk of failing to meet impending regulatory deadlines for implementing changes, including new reporting requirements, or simply taking a tick‑box approach, which may mean compliance is achieved at an unnecessarily high cost – both in terms of resources and risk.
Next, firms need to prioritise getting the foundations right, which can enable further automation and make it easier to meet the array of new regulation affecting their operations in a cost‑effective way. A lack of transparent and holistic reporting, including proper data‑lineage processes and controls, makes it difficult to cope with regulatory changes and efficiently manage external and internal audits.
At the Risk Technology Awards, AxiomSL was recognised for its Basel III compliance offering, winning the regulatory capital calculation product of the year award. Basel III requires firms to hold more liquid assets to safeguard solvency and overall financial stability, and getting the calculations right can help them maximise return on capital. To comply, firms need to calculate capital ratios, including risk‑weighted assets (RWA), which can easily overwhelm outdated legacy systems, therefore strengthening the case for upgrading systems and processes.
“Our data‑driven platform automates the process of calculating RWA and delivers it into multiple regulatory filings,” says Alexander Tsigutkin, chief executive and founder of AxiomSL, adding: “The solution’s data dictionary maps the client’s data into the proper asset classifications, while its regulatory calculation engine produces not only RWA results but also corresponding inputs to enhance auditability. Our flagship platform for change empowers financial institutions to make business‑critical decisions, adapt to continuously changing regulatory environments and deliver greater insight of their risk exposures.”
Gearing up for IFRS 9
On the accounting side, IFRS 9 is hitting headlines. Large banks have often operated with different credit risk models and credit‑impairment frameworks, and it relied on spreadsheets to run calculations.
With IFRS 9 being introduced this year, changes have had to be made to prepare for a new regime of more complex analytics and methodologies. To meet the new standard, organisations have needed to shift from a passive annual credit‑review regime to an active monthly credit-reporting regime – a cultural sea change for many firms. “To deal with these complexities, it’s critical for firms to gather all the dispersed, diverse credit data and artefacts into one credit ecosystem,” says Tsigutkin.
AxiomSL houses all credit data – including credit risk models, portfolio exposures, credit ratings and impairment rules – in a single data integrity and control platform. This single strategic platform, which is an industrial‑strength risk‑calculation engine and end‑to‑end solution, enables firms to map, aggregate and enrich clients’ financial, risk, asset‑liability management and macroeconomic data without duplication. It can extract, transform and load layers or intermediate databases, and can be plugged into clients’ and/or AxiomSL’s credit models (for probability of default, loss given default, exposure at default, and so on).
In addition, when using built‑in workflow capabilities, firms can pre‑process impairment calculations on demand, iterate and fine‑tune the end‑to‑end IFRS 9 process, and manage profit-and-loss volatility. As a result, Tsigutkin says, firms are armed with powerful and timely insights that enable finance and risk teams to collaborate and share data as mutual owners, thus enhancing firms’ ability to steer the bank and quickly adapt to the unrelenting flood of changes.
Leaning on lineage
As the volume and diversity of data continues to increase, and expectations for governance, quality and control keep rising, it is critical for firms to optimise business processes. In today’s market, there is a growing need for getting enterprise‑level data lineage right, in an automated fashion – something that is particularly challenging for firms operating with different technology systems that may not communicate with one another.
Depending on the system’s capabilities, data lineage is extracted manually as a one‑time activity – static data lineage – with policies keeping it up to date based on a larger architecture or sourcing update, or managed in an automated fashion where the technology system keeps the lineage accurate and up to date without any manual intervention.
The support for dynamic data lineage is especially important for technology systems used for regulatory filings since these reports are updated frequently by the regulator and correspondingly update to the sourcing and business rules to satisfy the regulatory changes.
According to Tsigutkin, AxiomSL’s GPS data navigator is equipped with a dynamic data‑lineage module that can be compared to the company’s GPS navigator – tracking the data route from source to final destination and collecting vital information and analytics that can streamline and optimise clients’ processes in a controlled environment.
This data‑lineage module captures and documents data flows, data transformations, critical data elements and business logic throughout the entire regulatory and internal management reporting process. “The intelligence gathered yields business value and faster time to market, while delivering the most reliable and trusted data route,” he says.
As regulatory complexity and the need for improved automation remains, mapping the route to the future will mean increased focus on integrated systems that can deliver on value, transparency and flexibility.