With many banks investing to reduce the level of their regulatory capital requirements, it’s no surprise that a number of our Tier 1 investment banking clients are taking advantage of the opportunities offered by Basel II Advanced Rating (AIRB). The latest balance sheet writedowns have raised this priority even further.

It‘s clear, however, that achieving this Advanced Rating has some dramatic implications for banks’ operating models: for their credit and market risk processes, their collateral management, their data and technology systems, and not least their organisation and their people. New business processes are needed to rate counterparty credit risk, and new risk models have to be defined and approved.

In this context the role of the risk officer changes, and new risk applications are needed to support this. First, collateral data quality must be improved and delivered to risk systems on a much more timely basis.  Second, risk weighted assets (RWA) data must be collected and delivered to where it’s urgently needed, with information held in current databases extracted, restructured and forwarded speedily to the right destinations.

And of course, the business model requires full regulatory approval. No wonder so many banks applied for waivers to the original timescales, but now those waiver expiry deadlines are approaching rapidly. It’s time to act. 

CASE HISTORY 1. WHOLESALE & INTERNATIONAL BANK: Credit function restructure and business process definition, mapping Basel II process requirements to achieve process efficiency and AIRB compliance.

CASE HISTORY 2. EUROPEAN UNIVERSAL BANK: Developed tri-party interfaces to feed bank’s systems with accurate and timely collateral data, supporting more accurate risk reporting.

CASE HISTORY 3. TIER 1 INVESTMENT BANK: Helped achieve Basel II Advanced Rating on schedule by providing broad support and premium expertise across several areas 

For further information please contact David Field or Charles Henderson on  (020) 7826 4444

Photograph © the FSA