Regulatory capital calculation product: SAS

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Risk Tech Awards winner

 

The SAS solution for regulatory capital helps financial institutions manage the complexities of regulatory capital calculation and reporting processes in an integrated, reliable enterprise framework. SAS RCM computes and reports the regulatory credit risk measures of a bank portfolio under the Basel IIIII and IV standards. It also optimises the allocation of credit risk mitigants while computing the credit risk measures. The continuous evolution of capital requirements regulation presents several challenges to financial institutions, including around interpretation. For example, the Basel IV standards could translate very differently to the standard Basel guidelines at a country or regional level. These complexities significantly increase the cost of compliance.

To lower this cost and eliminate the need for any internal development, there is a complete separation between the content and the underlying technological platform of the solution. RCM clients can regularly receive updates to regulations across jurisdictions as well as changes to credit risk approaches without upgrading their underlying platform and components. The calculation engine also allows them to significantly reduce run times: this is managed through a configurable workflow that orchestrates the end-to-end process per entity and reporting date and allows clients to execute each step. Furthermore, given the substantial supervisory scrutiny on these calculations, it is critical to have transparency in the process. RCM ensures the calculations are traceable and process flows are fully documented and easy to understand. It also offers simple and quick performance for ad hoc analysis and fast execution times.

Luis Jesus
Luis Jesus

Financial institutions often need to estimate the impacts of a change in risk parameters, calculation assumptions or regulatory parameters. With RCM, they can execute multiple types of ad hoc analysis for diverse regulatory configurations and incorporate intra-group effects for different consolidation levels of the organisation. The most complex step in the capital requirements calculation is the incorporation of multiple credit risk mitigation instruments under different types of business cases. Allocation of these instruments to the related exposures is critical. RCM optimises collateral allocation for all the required calculation steps, minimising the amount of capital requirements subject to all applicable regulatory and legal constraints.

Financial institutions can now implement SAS’s new Basel IV configuration to prepare for full compliance with this deadline in different jurisdictions. Along with the simulation and management analysis features, this allows clients to prepare for the impacts of the changes and simulate them for different credit risk approaches. SAS has also enhanced the current European configuration, Capital Requirements Regulation 2, in line with market expectations. The SAS solution now incorporates different types of simulation capabilities such as what-if analysis and attribution analysis. These allow users to anticipate the results from future changes to their credit portfolios, planned implementation of regulatory requirements and the evolution of their internal models and parameters. They also offer valuable insights on the behaviour of portfolios towards any market or regulatory variations.

The judges said:

  • SAS is a leader in its field – a well-deserved position. It has lots of high-quality offerings and great support – the client genuinely comes first.”
  • SAS offers good product coverage – the solution is expandable and adaptable.”
  • “This shows SAS flexing its muscles in commercial credit and occupying the traded space via securitisations and the large exposures framework.”

Luis Jesus, Advisory industry consultant, risk research and quantitative solutions at SAS, said:

SAS is honoured to win this award, which reflects our success in the regulatory capital space. The SAS RCM solution has evolved significantly over the past year to increase and update regulatory content, enhance the simulation environment and leverage the integration capabilities with the SAS Risk Stratum platform.”

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