Prometeia has been elected for the “Credit Stress-Testing product of the year” in the Risk Technology Awards 2019, sponsored by the prestigious Risk.net magazine.
Risk.net releases an annual industry survey to recognize the leading vendor solutions for Enterprise, Operational, and Credit Risk Management. Its independent panel of judges includes technology experts, risk management practitioners and members of Risk.net editorial team.
Prometeia develops ERMAS™ – a fully integrated platform supporting Balance Sheet Risk Management, Regulatory & IFRS Compliance, Performance Management & Control, Credit Risk Analysis and Credit Decision Management.
The acknowledgement has been given to one of the key components of Prometeia’s Suite, the ERMAS Stress Testing Module, designed to support the Integrated Stress Tests required by the European Banking Authority (EBA), as well as other stress testing exercises performed by banks for managerial or regulatory purposes (e.g. for ICAAP).
The module has been recently enhanced to comply with the 2018 EBA/ECB rules, in which banks were required to simulate portfolio exposure composition in terms of different IFRS9 stages, and to estimate the evolution of impairments, provisions and RWAs under multiple scenarios. Prometeia applied a bottom-up approach to fulfill all the requirements of the Credit Risk Stress Test exercise, enabling clients to successfully run the simulation and produce the final EBA templates.
Relying on a common set of methodologies and on a powerful scenario management tool, ERMAS supports different types of stress test approaches:
• Macroeconomic: using in-built or customized satellite models, users can evaluate the impact of changes in macroeconomic factors (GDP, unemployment rate, etc.), interest and FX rates on PDs, RWAs, expected and unexpected losses, directly calculated by the solution;
• Parametric: using a dedicated interface, users can stress all calculation parameters used for Capital Adequacy and IFRS9 Loss Provisioning, simulating for example a downturn in the economic cycle;
• Composition: using a simple GUI, it is possible to change the composition of credit portfolios and evaluate the impact on PDs, RWAs, Concentration Risk indicators, provisions, expected and unexpected losses.
Combining these approaches in a parametric and flexible way, customers can perform not only the latest EBA Stress Testing exercise but any other internal/managerial Stress Test analysis, such as growth in defaulted assets, loss of value of collateral, rating downgrade, etc.
“We are pleased to know that our leadership in this business segment is once more recognized by the industry analysts,” comments Andrea Partesotti, Head of Enterprise Risk Management at Prometeia. “A key differentiator of our Credit Risk Simulation is the integration with other Balance Sheet Management modules. We have delivered a truly holistic approach to dynamic simulation, enabling our clients to predict the evolution of Credit Risk metrics under multiple scenarios together with ALM, Market and Liquidity Risk variables. A robust stress testing must consider the intrinsic relationship between different risk factors in order to identify potential 'spiral' effects and evaluate possible mitigation actions. Therefore, a holistic view becomes a strategic necessity, more than a pure regulatory requirement.”
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