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Basel III Calculation and Liquidity Risk Reporting
Background
The tier 1 wholesale banking client engaged ACS to calculate and report:
- Short term liquidity – measured by Liquidity Coverage Ratio – maintain liquid asset buffer equal to total net cash outflow over a 30 day stressed period; and
- Long term liquidity – measured by Net Stable Funding Ratio – available amount of stable funding to exceed funding requirements over a one year stressed period.
- Consideration
- Focus on Tier 2 capital.
- Utilise common data for management reporting and regulatory reporting.
Solution
- Design incorporates credit value adjustment measures as applied to counterparty credit.
- Calculate counterparty credit exposures for derivatives, repo and securities financing
- Ensure OTC derivative contracts cleared through central counterparties.
- Convert loss estimates into capital and liquidity requirements.
- Stress testing results a pre requisite to the calculation process.
- Define and include liquid assets as per policy.
- Calculated cash flow mismatches based on contractual obligations.
- Solution is built on a defined data set comprising stressed results.
- Integrated management and regulatory reporting.
- Provision of dashboard for group and business unit management reporting.
- Summarized management reports output to mobile media.
Benefits
- Satisfied Basel III Calculation and LCR / NSFR regulatory requirements.
- Enable management to plan and manage liquidity requirements more effectively.
- Reduce funding costs for the bank.
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Krishan Gopal
Principal Consultant Credit and Market Risk
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