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Prometeia Simulation Enhancements help banks vault to EBA Stress Test Completion

Prometeia, the global leader in Risk Management consulting and software solutions, has released a new version of its ERMAS platform to facilitate and digitalize the implementation of 2016 EU-wide stress test for Net Interest Income (NII). The enhancements recently introduced to the ERM solution enable Prometeia clients to expedite the completion of the exercise in a straightforward way, according to the principles set by the the EBA within the Regulatory Stress Testing process.

ERMAS is a forerunner solution for compliance with the EBA methodological framework. “The new development is a further step to make the ALM simulation module more and more adherent to the requirements of EBA methodology, providing a user-friendly tool to support banks in the stress test exercise”, comments Andrea Partesotti, Head of Enterprise Risk Management Area in Prometeia. “Our clients have found our solution to be an effective answer to this very demanding activity and the challenging deadline set by EBA”.

The 2016 EBA exercise is designed to provide supervisors, banks and other market participants with a common analytical framework to compare and assess the resilience to economic shocks. For the P&L stress test, banks are required to project the expected Net Interest Income over a three year time horizon, under both a baseline and an adverse scenario, using the bank’s own ALM models but subject to specific methodological constraints. Furthermore, projected NII must be reported with a pre-defined breakdown to allow the regulator to validate the consistency of the information provided.

Among the newly released features:
• projection of outstanding volumes and interest rates according to underlying reference rates and margin components;
• splitting of outstanding volumes and interest rates into existing, maturing and new positions for each year of simulation;
• calculation of the Average Point of Maturing;
• calculation of the impact of Credit Quality migration on defaulted assets’ outstanding volume and interest income.
Users of the ERMAS platform will greatly benefit from these new features, which allow them to complete the exercise smoothly and without the drawbacks and operational risks of Excel files and other top-down systems.

Details of the calculation are available at the minimum level of aggregation so that the consistency of the analysis and methodologies can be readily demonstrated to auditors and regulators.

ERMAS, the new generation of value-centric Risk solutions, is used by over 200 clients in more than 20 different countries to support their critical decisions and to comply with local and international regulatory requirements.