Prometeia, the global leader in Risk Management consulting and software solutions, announced that its ERMAS Suite is now enhanced with a new EU 2018 Stress Test compliant Credit Risk Module, a tool designed to calculate impairment and RWAs in line with the latest requirements set by the IFRS framework and the EBA stress testing methodology.
The IFRS9 accounting standards introduced a new provision calculation method, strictly linked to credit risk parameters and based on the concepts of stage and expected lifetime/12-months credit loss. The methodology required for the EBA Stress Test has therefore been revised by the European regulator, in order to reflect the new requirements of the IFRS9 impairment.
"The EU 2018 Stress Test Credit Risk Module represents a significant step forward in our methodological framework for integrated balance sheet management," comments Massimo Pedroni, Senior Partner and Head of International Business at Prometeia. "With this component Prometeia completes a comprehensive redesign of its Risk solution in line with the new IFRS requirements, which started with the accounting classification, through the calculation of amortized cost and IFRS13 Fair Value, up to the projection of IFRS9 loss provision over the future."
ERMAS has been integrated with dynamic features that allow the key risk parameters and the portfolio volumes to evolve according to customer-specific satellite models and applying transition matrices between rating and stage conditioned to macro-economic scenarios. Starting from the initial provisions and RWAs already available in the ERMAS Suite, it is now possible to project the future values of these variables in order to determine the impact on future P&L over the simulation time horizon.
Clients can achieve the following benefits:
• Possibility to combine internal parameters (PDpit, LGDpit, PDreg, LGDreg, Elbe,…) and to apply user-defined equations / user forecasts in order to calculate the future risk metrics, under the baseline and stress scenarios;
• Wide set of dynamic migration matrices, including the possibility to shock the rating and the stage migration separately, and then combine them or use pre-combined rating/stage migration directly;
• All risk parameters are shared with the IFRS9 and RWA modules, so that users can rely on consistent models, transition matrixes, PD and LGD curves;
• Possibility to determine the lifetime PD values for the ‘stage 2 provisioning’ with the bank-specific approach (migration matrix, Weibull distribution, gamma distribution, …);
• Calculation of the impairment values in compliance with the related stage and the EBA methodology, coherently with the EBA template constraints;
• RWA projections based on the specific approach (standard or IRB) of each portfolio, the ‘reg’ parameters and volumes evolution.
Users of the ERMAS platform will greatly benefit from this new analysis module, intended to maximize the simulation flexibility and ensure a comprehensive modelling of credit risk drivers, fully integrated with the IFRS framework.
Prometeia, the global leader in Risk Management consulting and software solutions, develops ERMAS, a fully integrated platform supporting Balance Sheet Risk Management, Regulatory & IFRS Compliance, Performance Management & Control, Credit Risk Analysis and Credit Decision Management.
ERMAS, the new generation of value-centric risk solutions, is used by over 200 clients in more than 20 countries to support their critical decisions and to comply with local and international regulatory requirements.
Albaraka Türk has recently upgraded its funds transfer pricing framework in collaboration with Prometeia, a leading provider in risk management t...View article
Prometeia – the global provider of tools and analytics for wealth, asset & risk management – has been selected again for the WealthTec...View article
Prometeia, the leading provider of risk management solutions, and Basinghall Analytics, a quant house focusing on risk modelling, data and regulation,...View article