Basel II/III

 

How to use Loxon Basel II and Basel III in everyday risk management?

Financial risk management has experienced enormous improvements in the last 20 years both from theoretical (risk measurement) and practical (risk management) point of view. Basel II and Basel III now give you options to choose risk measurement methods that are most appropriate to the stage of your development and to the financial market in which you are operating.

  • Share with you our experience in risk management, IFRS provisioning and Basel II /III system implementations in CEE, CIS and MEA
  • Understand your needs (e.g. national discretions on Basel II / III and preferred market, credit, operational risk calculation methods) and customize our System on them
  • Support the complete Basel II /III regulatory reporting process in an auditable and automated way reducing manual work
  • Provide you a tool to better understand the overall integrated risk profile of your company
  • Guide you through the risk management system implementation process
  • Calculate specific and collective impairment using standard IFRS compliant methodology
  • Support different provisioning processes for different business segments
  • Calculate provision allocation and release as well as year-to-date provisions
  • Calculate unwinding of discount
  • Support the complete provision calculation process in an auditable and automated way reducing manual work
  • Completely integrate our System into your IT and business environment
  • Optimize your regulatory and economic capital requirement as well as your total loan loss provisions by optimal collateral allocation; utilizing the wide range of state of the art risk calculation methods
  • Be fully Basel II and III compliant from regulatory reporting point of view (Pillar I, Pillar II and Pillar III reports, incl. e.g. stress tests)
  • Maximize the risk adjusted performance (e.g. RAROC) of your portfolio through optimizing the portfolio composition
  • Analyze the risks of your portfolio by slicing and dicing it by several dimensions (e.g. by Industry or region)
  • Have a perfect insight into the logic of the systems instead of using a black box solution
  • Have full control over your capital allocation and provisioning processes
  • Execute stress tests, calculate forecasts and analyze possible future scenarios to be prepared for the threats of the future
  • Reconcile all data in the System with the general ledger both on granular and aggregated levels
 

Basel II and Basel III and the new IFRS provisioning rules are not only about how to calculate the minimum capital requirement and the provisions, but much more. In its second Pillar, it puts emphasis on everyday risk management practices.

You should always be aware of all the risks you run, and you should have sound processes to manage (monitor and control) them. You should also calculate your economic capital requirement which ensures that you remain going even under adverse conditions, taken into account all material risks (e.g., liquidity risk, reputational risk, etc.).

What is included Loxon Basel II and Basel III?

Loxon Basel II and III risk calculation engine is an integrated risk management system serving the quantification of risk, capital adequacy, provisioning and reporting needs for the Bank according to IFRS, Basel II and Basel III. The System is built on a modular logic.

The Credit Risk Module handles all methods (Standardized, IRB foundation/advanced), in case of credit risk mitigation it allows all techniques (simple/comprehensive), all types of CRM (collateral, guarantee, netting, etc.), and securitization.

The Market Risk Module provides the calculation results according to the Standardized Approach and the Value at Risk based Internal Model Method.

The Operational Risk Module supports the Basic Indicator, Standardized Approach, and the Alternative Standardized Approaches, and provides the Operational Risk Loss Database, KRI-s and Risk and Control Self Assessment for predicting operational risk losses.

The IFRS Provisioning module calculates individual and portfolio based loan loss provisions, impairments based on IFRS (International Financial Reporting Standards) regulations as of current date or year to date.

 

How will Loxon Basel II and Basel III work for you?

The Basel II and Basel III System supports both direct and indirect upload of necessary input data from primary registry systems, accounting/financial systems or data mart on a daily basis. Additional data not available in the primary registry systems can be uploaded from excel files manually. Data completeness and correctness are indispensable for proper calculation, therefore the incoming and stored data will be checked against pre-defined conditions.

The Stress Testing Module shows the effect of simulated simultaneous extreme changes in several variables (risk parameters like market factors or PD, LGD, CCF), determining the risk of the portfolio for the various risk types.

The Economic Capital Module provides economic capital calculations supporting the requirements of ICAAP.

The RAROC Module provides risk adjusted performance calculations based on regulatory capital and/or economic capital figures.

With our System you can meet all of the high risk management standards set up by Basel II and Basel III from Pillar I, Pillar II and Pillar III point of view.

More importantly, we believe that Banks with better risk management practices can be more competitive. They can be much more precise in risk based pricing, conscious in steering their portfolios. They will also be able to maximize their risk adjusted performance through more sophisticated capital and collateral allocation. At the end of the day, they will be more prudent and profitable.

Be up-to-date and on top of your business with Basel II and Basel III. If you want to know more about Basel II and III, contact us here.

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