Prometeia looks ahead to future IFRS 9 Measurement and Reporting challenges

Prometeia, the global leader in Risk Management consulting and software solutions, announced the release of a new module for the ERMAS 5 Suite. The IFRS9 Compliance Module effectively deals with all aspects of the new impairment model, including data granularity, forecast of future losses, new calculation and simulation requirements, as well as advanced reporting dynamics.

The integration of the IFRS9 measurement and reporting framework into Prometeia’s Enterprise Risk analysis platform leverages the complete set of analytical features already present in the suite, including the powerful calculation and user-friendly interface for bucket assignment.

“Our goal is to meet the current and future needs of banks in implementing the incoming requirements of IFRS 9. The fundamental change in the impairment model from Incurred Loss to forward looking Expected Loss (EL) will give an answer to the ‘too little, too late’ criticism of IAS rules,” comments Massimo Pedroni, Head of International Business in Prometeia. “We think this is a significant step forward, long awaited by banking players and regulatory bodies. IFRS 9 will become a new paradigm in the financial industry and a significant improvement towards its stability in the long term,” concludes Pedroni.

The main impact on banks is the need to recognize EL for all financial products, at individual and grouped-asset levels. Banks will have to update their calculation at each reporting date to reflect changes in the credit quality of their assets. This will significantly increase the complexity of impairment assessment, as well as the amount of data to be managed for such purpose.

New functionalities related to IFRS 9-in ERMAS 5 are:
• IFRS 9 impairment measurement in accordance with the International Financial Reporting Standards and its approved Guidelines
• Dynamic Simulations of Loss Loan Provisions under the IFRS 9, based on both libraries of Bucketing Rules and flexible Expected Loss Calculations
• What-if and stress test analysis, which leverage on the powerful simulation and scenario management tools already included in ERMAS 5

Prometeia’s Credit Risk Solution includes many features and functional implementations related to the IFRS 9 requirements, such as:
• Data warehousing of information linked to financial instruments;
• Enhanced management of Expected Loss models for the calculation of the 12-month Expected Losses and full Lifetime Expected Losses;
• Parameterization of all dimensions and variables available in the dataset and data in impairment Perimeter for the definition of bucket assignments as well as reporting features;
• Development and generation of stressed term-structure PDs and stressed transition matrices using the advanced features of macroeconomic scenario simulations present in ERMAS 5.
• User-friendly functionalities to support IFRS 9 impairment calculations and expected losses modelling;
• Efficient and rationalized data model, aligned with the best practices in IFRS 9 reporting.

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.
 

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