Regtech Vendors License ISDA Benchmarking for SA Capital Calculations
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
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Trevor Howes
IFRS 17 technical advisor; AXIS actuarial modeling system expert; extensive experience in life insurance and life reinsurance, with focus on modeling, valuation, and financial reporting
Previous Article
PRA Issues Policy on Implementation of Certain Provisions of CRD5Related Articles
EBA Publishes Final Regulatory Standards on STS Securitizations
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.
ECB Further Reviews Costs and Benefits Associated with IReF
The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.
EBA Publishes Funding Plans Report, Receives EMAS Certification
The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).
MAS Launches SaaS Solution to Simplify Listed Entity ESG Disclosures
The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.
BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules
The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.
IOSCO Welcomes Work on Sustainability-Related Corporate Reporting
The International Organization of Securities Commissions (IOSCO) welcomed the work of the international audit and assurance standard setters—the International Auditing and Assurance Standards Board (IAASB)
BoE Allows One-Day Delay in Statistical Data Submissions by Banks
The Bank of England (BoE) published a Statistical Notice (2022/18), which informs that due to the Bank Holiday granted for Her Majesty Queen Elizabeth II’s State Funeral on Monday September 19, 2022.
ACPR Amends Reporting Module Timelines Under EBA Framework 3.2
The French Prudential Control and Resolution Authority (ACPR) announced that the European Banking Authority (EBA) has updated its filing rules and the implementation dates for certain modules of the EBA reporting framework 3.2.
ECB Paper Discusses Disclosure of Climate Risks by Credit Agencies
The European Central Bank (ECB) published a paper that examines how credit rating agencies accepted by the Eurosystem, as part of the Eurosystem Credit Assessment Framework (ECAF)
APRA to Modernize Prudential Architecture, Reduces Liquidity Facility
The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility (CLF) for authorized deposit-taking entities to ~USD 33 billion on September 01, 2022.
