Featured Product

    Regtech Vendors License ISDA Benchmarking for SA Capital Calculations

    December 09, 2020

    ISDA has announced that eight technology vendors have licensed the ISDA Standardized Approach, or SA, Benchmarking unit tests to promote consistent implementation of the standardized approach for calculating capital requirements. The eight vendors are ActiveViam, Avera AI (Area 120 at Google), AxiomSL, Calypso, Finastra, FIS, MSCI, and Murex. In 2018, ISDA had launched the Standardized Approach Benchmarking to help firms and regulators achieve consistent and accurate implementation of the standardized approaches for regulatory capital for market risk, known as the Fundamental Review of the Trading Book (FRTB). The exercise is also used to benchmark the use of standardized approaches for counterparty credit risk (SA-CCR) and credit valuation adjustment (CVA) risk and leverages the Common Risk Interchange Format (CRIF) data standards.

    So far, 52 banks, including 23 global systemically important banks, and 16 regulators have participated in the benchmarking exercise. The vendor licensing program allows the benefits of Standardized Approach benchmarking to reach smaller entities that use third-party systems for their capital calculations. The ISDA Standardized Approach Benchmarking exercise comprises a unit test to ensure the fitness of implementation of the standardized approach across firms and a hypothetical portfolio exercise to identify, assess, and explain any observed variances and coordinate remediation where necessary. In the same way as vendors have licensed the ISDA Standard Initial Margin Model (ISDA SIMM), they can license the unit test by confirming to ISDA that they have reconciled their technology to the industry standard.  The unit test and hypothetical portfolio exercise together form part of an assurance framework for both banks and regulators.

    ISDA was selected in the UK to help coordinate the first FRTB-SA benchmarking exercise and run an industry working group, leveraging the capabilities and experience gained in performing similar exercises for the ISDA Standard Initial Margin Model. Participating institutions benefit from a peer-to-peer review of their standardized approach model implementation, enabling them to address possible interpretation issues in the regulatory text. Following interest from other institutions and regulators, ISDA has expanded the scope of this initiative to cover other participating institutions and other capital models, including SA-CCR and SA-CVA.

    AxiomSL claims to be one of the first vendors to deliver these complex calculations that are attested to ISDA’s unit test benchmark. The golden source calculations are designed to ensure the credibility of firms’ standardized calculations for FRTB, SA-CCR and CVA, and this initiative will help promote transparency and alignment between regulators and market participants, according to Edward Royan, Head of Global Products at AxiomSL. Additionally, Irina Reitgruber, Product Management, Market Risk at FIS said that "this will provide our customers with additional value and allow our solution to communicate with surrounding IT systems using standard international formats.” FIS had previously licensed the ISDA SIMM unit test and is now participating in the ISDA FRTB-SA unit test. 

     

    Related Links

    Keywords: International, Banking, Basel, Regulatory Capital, Standardized Approach, SA-CCR, SA-CVA, FRTB, Market Risk, ISDA Benchmarking Tool, Hypothetical Portfolio Exercise, Regtech Vendors, ISDA

    Featured Experts
    Related Articles
    News

    FED Revises Capital Planning and Stress Testing Requirements for Banks

    FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.

    January 19, 2021 WebPage Regulatory News
    News

    ECB Releases Results of Bank Lending Survey for Fourth Quarter of 2020

    ECB published results of the quarterly lending survey conducted on 143 banks in the euro area.

    January 19, 2021 WebPage Regulatory News
    News

    ESAs Publish Reporting Templates for Financial Conglomerates

    ESAs published the final draft implementing technical standards on reporting of intra-group transactions and risk concentration of financial conglomerates subject to the supplementary supervision in EU.

    January 18, 2021 WebPage Regulatory News
    News

    EBA Publishes Report on Asset Encumbrance of Banks in EU

    EBA published the annual report on asset encumbrance of banks in EU.

    January 18, 2021 WebPage Regulatory News
    News

    MAS Revises Guidelines on Technology Risk Management

    MAS revised the guidelines that address technology and cyber risks of financial institutions, in an environment of growing use of cloud technologies, application programming interfaces, and rapid software development.

    January 18, 2021 WebPage Regulatory News
    News

    US Agencies Publish Updates for Call Reports, FFIEC 101, and FR Y-9C

    FED updated the reporting form and instructions for the FR Y-9C report on consolidated financial statements for holding companies.

    January 15, 2021 WebPage Regulatory News
    News

    EBA Proposes Guidelines for Establishing Intermediate Parent Entities

    EBA issued a consultation paper on the guidelines on monitoring of the threshold and other procedural aspects of the establishment of intermediate EU parent undertakings, or IPUs, as laid down in the Capital Requirements Directive.

    January 15, 2021 WebPage Regulatory News
    News

    EC Adopts Financial Reporting Changes Arising from Benchmark Reforms

    EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates.

    January 14, 2021 WebPage Regulatory News
    News

    BIS Bulletin Examines Key Elements of Policy Response to Cyber Risk

    BIS published a bulletin, or a note, that examines the cyber threat landscape in the context of the pandemic and discusses policies to reduce risks to financial stability.

    January 14, 2021 WebPage Regulatory News
    News

    HMT Updates List of Post-Brexit Equivalence Decisions in UK

    HM Treasury, also known as HMT, has updated the table containing the list of the equivalence decisions that came into effect in UK at the end of the transition period of its withdrawal from EU.

    January 14, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6462