Group-wide aggregation and rating of third parties

Rationalise processing and calculation of equity capital.

In today’s competitive market, optimizing how risk-weighted assets, or RWA, are calculated is crucial to reduce the cost of regulatory capital. The internal approach allows banks to use internal methodologies that closely match allocation with the specific risks associated with each counterparty and product, but they also generate acute data management issues. It’s not uncommon to find 80% of project budgets eaten up by the problems of reconciling and strengthening data quality.

Such difficulties tend to increase in very fragmented organizations, like mutual savings banks, regional banks or groups with many subsidiaries. More specifically, aggregating counterparty repositories, updating them and synchronizing them with ratings engines – sometimes automatic, sometimes manual – can quickly descend into nightmare territory. If you have experience in this area, then you’ve probably had to grapple with one of these technical difficulties:

Repositories in different formats to be reconciled at group level
Managing updates to both counterparty data and the repository characteristics; managing audits
Ability to seamlessly interface third-party repositories with the rating engine without desynchronizing the data (taking potential duplication into account)
Performance issues: ratings can sometimes take a long time to compute
Audit problems, when there are changes to the counterparty data and/or the ratings model
Difficulty testing and simulating the results generated by new models on a sample of actual, deep data
Difficulty opening up these platforms to new approaches: Spark, R, Python, etc.

All these problems can be uniformly and natively managed by the Scaled Risk platform. In a single, open tool, our real-time technology automates and unifies:

Integration of siloed data (in different formats from multiple sources)
Data storage, governance and audit
Reconciliation and treatment of data quality
Incorporation of calculations
Simulation and back-testing
Interaction with the world of data science

The IT budgets needed for even minor technical changes to how banks compute and report equity capital can quickly run to several million euro and audit requests can take on nightmare proportions. To meet these challenges, Scaled Risk delivers a new-generation, flexible and cost-effective solution to rationalize the processing and calculation of banks’ regulatory capital.