Author: Julie Duncan

IRRBB Consultation Document Published by Basel Committee on Banking Supervision

Posted on by Julie Duncan

The Basel Committee at the Bank for International Settlements has just published (8th June 2015) its consultation document on a review of the regulatory treatment of interest rate risk in the banking book (IRRBB).

The BIS wants to strengthen the treatment of IRRBB to ensure that banks have appropriate capital to cover potential losses from their risks to changes in interest rates. Also, to limit any capital arbitrage between the trading book and the banking book, as well as between banking book portfolios that are subject to different accounting treatments.

The BIS is seeking comments on two options for the capital treatment of interest rate risk in the banking book:

  • a uniformly applied Pillar 1 measure for calculating minimum capital requirements, to promote greater consistency, transparency and comparability, thereby promoting market confidence in banks’ capital adequacy and a level playing field internationally;
  • a Pillar 2 option, which includes quantitative disclosure of interest rate risk in the banking book based upon the proposed Pillar 1 approach, which would better accommodate differing market conditions and risk management practices across jurisdictions.

The outcome of this consultation may be expected to feed through – in due course – into amended EU capital rules and will therefore, impact all UK Banks and Building Societies. ALMIS® International are at the forefront of providing a dedicated solution to IRRBB through its market risk module. Banks are invited to make comment before 11th September 2015.

For more information, contact Jenna Haston on 0131 452 8898 or email [email protected]

PRA Publish Policy Statement and Supervisory Statement on Liquidity

Posted on by Julie Duncan

The PRA has today (8th June 2015) issued a brief policy and supervisory statement.

Some concessions to proportionality, particularly in reporting, have been made. The documents do however, set out more clearly how firms are expected to manage liquidity under CRD IV.

Key to this, is a requirement for daily reporting for firms with assets greater than £5bn for:

  1. COREP LCR (C 72.00 – C 76.00)
  2. Contractual maturity ladder (AMM C 66.00)
  3. Rollover (AMM C 70.00)

Additionally, firms are expected to continue to strengthen stress testing and incorporate liquidity costs into fund transfer pricing more fully.

ALMIS® International are experts in helping firms implement and integrate solutions in all three of these areas (liquidity reporting, stress testing and funds transfer pricing from one system).

Policy statement CRD IV: Liquidity – PS11/15

The PRA’s Approach to Supervising Liquidity and Funding Risks – SS24/15

For more information on the ALMIS® solution, contact Jenna Haston on 0131 452 8898 or email [email protected]

Scottish Business Pledge

Posted on by Julie Duncan

scottish business pledge

ALMIS® International are delighted to make the commitment to the Scottish Business Pledge.
The Scottish Business Pledge is a values-led partnership between the government and business. It is a shared ambition of boosting productivity, competitiveness, sustainable employment, and workforce engagement and development.

It is built on:

  • a commitment from the Scottish Government, and its partners to support sustainable business growth in Scotland
  • a voluntary code of business practice which you can use to guide and boost the future development of your company
  • a mutual pledge to ensure that prosperity, innovation, fairness and opportunity develop hand in hand in Scotland

Look out for more updates in the coming months around how ALMIS® International pledge to deliver on all nine components of the Scottish Business Pledge.

To find out more, please visit Scottish Business Pledge

Increased Regulation Reporting from June 2015

Posted on by Julie Duncan

Banking institutions across Europe are having to deal with increasingly complex reporting requirements. This is a significant challenge (and cost) for finance departments in Building Societies. At ALMIS® International, we are pleased to provide these additional reporting capabilities seamlessly, on time and without additional cost.

The European Banking Authority has recently published COREP/FINREP Taxonomy 2.3 – for submissions from June 2015.  The focus of the v2.3 taxonomy is on the introduction of Additional Liquidity Monitoring Metrics (ALMM), Supervisory Benchmarking Portfolios (SBP) and corrections to the Funding Plans package released in v2.2, with minor on-going amendments to COREP and FINREP. This has resulted in around 25 new COREP templates.

Taxonomy 2.3.0.0 includes;

  • Over 560 formula assertions changes (additions, reactivated, reintroduced and deleted)
  • 80 changes to overall templates (new and amended)
  • 15 new entry points,  bringing the total to 50
  • First appearance of a metadata item in the taxonomy itself that identifies the “effective to” date of the taxonomy package version
  • A new feature of the validation rules spreadsheet is the ‘severity’ column, with values ‘Blocking’ or ‘Non-Blocking’ for each rule

In addition there are new liquidity reporting requirements and templates which are yet to be finalised and will come into force next year.

EBA releases 2.3 Taxonomy to commence 30th June 2015 containing new ALMM and SBP templates.

For more information on how the ALMIS® solution can work for you, contact Jenna Haston on 0131 452 8898 or email [email protected]

New Release – 9.61

Posted on by Julie Duncan

Front Office V9.61 and DLL 3.1 Available for Download

We are pleased to announce that our scheduled release of Version 9.61 is now available for our clients. We have also released an updated DLL on taxonomy 2.2 which should be used alongside this Front Office.

This release corrects many of the usability and minor bug fixes reported and logged by ALMIS® support. This version will make it easier for clients to auto populate COREP CA, CR, LE, LR, LC and SF returns and will also make it easier to submit COREP under taxonomy 2.2 using manual/excel population.

Liquidity Under CRD IV – What can we do to mitigate the burden?

Posted on by Julie Duncan

Liquidity Under CRD IV ––63 banks and building societies attend webinar

Feedback used in response to CP 27/14

Banks and Building Societies well understand the need to be fully informed of any proposed changes to key regulatory frameworks such as CRD IV. Liquidity has become a primary driver under the new regulations and LCR reporting and stress testing will have significant impact, especially on smaller, more simplified firms.

To help bring clarity to the proposed changes and to facilitate debate around the key issues, Jeremy Palmer (Head of Financial Policy) from The Building Societies Association (BSA) in conjunction with ALMIS® International, hosted a highly informative and interactive webinar on Wednesday 18th February, attended by 63 delegates.

The webinar explained the proposals and their likely impact but also discussed BSA amendments to mitigate these changes and how firms can effectively comply by using a fully automated and integrated system such as ALMIS.

Here’s a brief summary of the key issues and highlights of the debate.

What’s the history?

Basel proposed a liquidity regime in late 2010 which the EU hard wired into CRD IV– quantitative pillar 1, pillar 2 and reporting under COREP. This was supplemented by TS drafted by the EBA and now, CRD IV plus TS will replace the PRA regime in BIPRU 12. CP 27/14 explains how PRA will make the transition.

Headline Proposals in CP 27/14

The current simplified regime will be revoked with the LCR Glide path moving from 80% in October 2015 to 100% by January 2018.

The capacity to report the LCR on a daily basis will be included and the reporting burden will increase further as the FSA 047/048 will be maintained for another two years.

Changes to categorisation will mean that pre-positioned non-HQLA cannot be in included in LCR/Pillar 2 calculations but can be included in OLAR.

All firms but particularly simplified firms will need to increase the level of stress testing

What’s the likely impact on Banks & Building Societies?

Liquidity calculations and reporting will become much more onerous and complex and the number of liquidity stress risk drivers will increase – especially for simplified firms.

Using ALMIS® to meet the challenge – automation is key

Regardless of the final detail of the proposed changes, there will be an increase burden in the complexity, volume and frequency of calculating and reporting the LCR and stress testing liquidity. ALMIS® International has created a modular, integrated system that deals effectively with the proposed changes by:

  • Auto-population of the LCR

  • Utilising the same data sets for liquidity stress testing and regulatory reporting

  • Capability to understand liquidity risk drivers

  • Forward looking and dynamic analysis

  • Combine capital and liquidity stress test

For a video of the webinar presentation and accompanying slides contact Jenna Haston on 0131 452 8898

Former ALMIS® developer creates new ALMIS® website

Posted on by Julie Duncan

When we decided to develop a new website for ALMIS® International, the top priority was to optimise our two-way communication with clients. We wanted to make it as easy and as effective as possible for you to monitor support issues, product updates, issue fixes and to give us real-time feedback on the product enhancements that are key to your ALM and Regulatory Reporting processes.

Lighten with Chris as its CEO (or Chief Lightening Officer), was the ideal company to develop the new website. Chris worked as a developer at ALMIS® International in the early days and understands at first hand the power and potential of ALMIS. Chris was the second programmer to work on the system (from 1993-1995) and oversaw the move from Clipper to Visual Objects.

Over ten years ago Chris established his own website development company – Lighten, building elegant web applications which combine great design with software excellence. This was exactly the combination ALMIS® International wanted for the new public and client areas of our website.

The team at Lighten not only specialise in WordPress but have built their own software for managing WordPress websites on a dedicated private cloud. This ensures greater security than other providers, who simply resell generic hosting packages – a factor which is key to the ALMIS® client area. This combined with bespoke technology and flexibility for future development is a winning combination.

Feeling over regulated? Don’t forget to make a healthy interest margin in 2015

Posted on by Julie Duncan

The new regulations that came into force last year and continue into 2015 are a significant challenge particularly for Banks and Building Society finance departments.

The new prudential regulations focus on capital and liquidity. It is widely accepted that Building Societies and Banks have strong liquidity positions and control capital resources well and many close to the detail will find many of the new regulations not only resource consuming and expensive to comply but also not all that helpful. The concern though is we do not want these regulations to take focus away from making a healthy and sustainable interest margin. Managing interest margins needs to be the focus.
In 2015, Interest rate risk and margin management is getting more complex and needs constant scrutiny and analysis, particularly if margins are to remain healthy in the medium term.
Bank base rates have not have changed for years but finance and treasury departments know that Interest rate risk and margin management is probably now the most important financial issue for building societies in 2015.
In the last few months we have seen 10yr swap rates fall by over 50 bp, SwissFranc rates have turned negative and whist this may not effect building society and banks financials straight away, it is a signal of a fundamental change to capital markets.
These market rates are an expression of what the market believes shorter term rates are going to be over the medium to long term, and there is no doubt the market has modified its expectation of an early rise in interest rates. On the other hand competition for funding is increasing and the mix of interest basis on assets and liabilities is changing as building societies face the challenge of market and regulatory pressures. There are however, opportunities to build healthy margins and the finance department with skilled treasury and asset liability management expertise and analysis will be best placed to navigate this.
This involves a good FTP technique where the true cost of liquidity is calculated – a liquidity charge that is right for the particular firms and not based on assumptions only relevant to large firms that access wholesale capital markets. It needs good margin variance analysis to understand margin movements and the relative contribution of that different lines of business provide and most importantly a forward looking analysis that can provide management with a vision to implement the right business strategy. The good news is that it is also far more interesting than filling in COREP returns!
Wishing you all a prosperous 2015.

 

New Release – 9.60

Posted on by Julie Duncan

It has been a particularly challenging year for everyone involved in bank and building society asset liability management and regulation reporting. Whist it has taken us longer we are extremely proud to announce the release of ALMIS® Version 9.6 which includes the latest COREP/FINREP Taxonomy 2.2 to be used for December submissions.

This version is:,

 

  • Significantly FASTER at performing producing COREP reports COREP validations and generating XBRL (up to 50 times faster!!)

 

  • It has ALL COREP reports automated from ALMIS® data, including the CA, CR, LE and LR using capital adequacy calculations and LC and NSFR using liquidity calculations

 

  • It works to take account of EBA rounding rules so our validations will match Gabriel validations

 

  • Whilst 2.1 already included Asset Encumbrance this version is the version used for first submission

 

This is a significant milestone for us and we believe will help finance and treasury executives cope with the increasing regulations and help control risk and maximise the financial performance of your bank and building society.

We are particularly enthusiastic about helping our clients comply with the new CRD IV Liquidity regulations as we believe ALMIS® is the only product available to completely fulfil all the requirements set out in the PRA consultation CP 27/14. We have now developed the first ever product to deliver bank ALM, EBA regulation reporting, macro hedge accounting and detailed forward planning and analysis all using the same consistent data, settings and assumptions.

New CRD IV Liquidity rules are going to be a challenge for both small and large banks

Posted on by Julie Duncan

We are beginning to see some clarity for liquidity under CRD IV. The PRA have recently published a consultation paper CP27/14 and this is based on the EU Delegated ACT published on 10th October 2014.

So what does all this mean for Banks and Building Societies?

  • LCR reporting – the detail of COREP LC is an intricate reporting requirement and differs in complexity from the FSA 047 and 048. All banks need to produce BOTH and the PRA look like demanding the capability to report the LC daily. Firms will need to maintain reporting of FSA 047 and FSA 048 for up to two years after the introduction of the full suite of COREP liquidity returns in 2015.

  • LCR reporting is to become mandatory also for UK Branches of third country firms and UK designated investment firms.

  • Revoke BIPRU 12. This includes revoking the simplified ILAS regime and the requirement on firms to undertake standardised stress testing. Chapter 1.14 says the PRA recognises that the removal of the simplified ILAS modification will increase the compliance costs for those firms that previously benefited from it. Simplified ILAS firms such as small banks and building societies will also need to apply the same stress testing approach as other firms.

  • Carry forward the broad principles established in BIPRU 12 into the new regime.

  • Apply a transition to 100% LCR on 1 January 2018 in the following steps: an 80% requirement from 1 October 2015, rising to 90% on 1 January 2017. Table A at chapter 2.7 shows the PRA is applying higher percentages than the minimum path set down by Article 460 of the CRR.

  • Carry forward existing add-ons not covered in the LCR as the new Pillar 2 add-ons, until each firm’s next liquidity review.

  • Require that firms integrate fully the operational requirements outlined in Delegated Act Article 8.

  • Propose that if pre-positioned assets are not eligible for inclusion in the HQLA buffer, they cannot be used to meet the PRA’s quantitative liquidity guidance.

ALMIS® is particularly well placed to assist firms meet these regulations. We have a completely automated approach to producing the LCR and NSFR from source data and this will be particularly valuable in helping firms meet the daily requirement. Our sticky rules table is highly configurable and can be set up to meet the exact requirements of the Delegated ACT. Also from the same source data firms can set up and run a whole series of idiosyncratic and market-wide stress test. All this can also be forward looking to firms can see what their LCR is in say 7 days’ time or what the stress tests might look like as a result of its business and financial plans.

For further information please visit www.almis.co.uk or contact Jenna Haston to arrange a demonstration.