Capital adequacy, regulations, CRD IV, CRR, CRD V, CRR II, Basel IV

Analysis

Deloitte Fluent Capital Adequacy

Software Solution

Deloitte Fluent Capital Adequacy is a modern, enterprise-class software solution developed to enable banks to deal effectively with the challenges posed by the current (CRD IV / CRR) and upcoming (CRD V / CRR II, Basel IV) capital adequacy regulations. Its functional design draws on learning gained from our experience in helping banks address challenges posed by the regulations. Its architecture brings modern technologies to the software platform which we have developed and successfully used to implement various analytical solutions for our banking clients.

Capital Requirements Regulation (CRR) provides a single set of harmonised prudential rules which institutions throughout the EU must respect. According to CRR requirements, all banks need to calculate and report the value of capital requirements for credit, market and operational risk. The calculation of capital requirements value is crucial to determine the capital adequacy ratio and assess the capital position of banks. In order to strengthen the resilience of the banking sector and make capital requirements more risk-sensitive, regulatory requirements are constantly being improved. New versions of regulations (CRD V / CRR II and Basel IV, SA-CCR, FRTB) are currently under discussion.

Increasingly complex regulations mean financial institutions face many new requirements, complying with which may entail significant effort and expenditure. Challenges in adapting to new regulations often result from the lack of appropriate technology support due to existing legacy software or poorly integrated, dispersed functionalities or data sources. To compensate for these deficiencies, business processes in many institutions have become overly complicated and inefficient, often through the use of numerous error-prone manual tasks. The business and regulatory changes implemented in many environments over recent years have further negatively affected transparency and operational risk in the capital adequacy process.

Deloitte has supported many financial institutions in implementing capital adequacy regulations, providing business advisory services (eg. support in quantitative impact studies and stress tests) and software implementation. This experience has confirmed that existing systems (stand-alone or operating on top of MIS/Data Warehouse, some even dating back to the early Basel 2 era) are often incapable of properly supporting current regulatory requirements and business needs. In many cases, they do not provide enough insight into capital allocation or the effect of risk mitigation on capital requirements. This conclusion, shared by many financial institutions, becomes even more concerning in the light of upcoming regulations such as CRD V/ CRR II and Basel IV, SA-CCR or FRTB.

To learn how Deloitte Fluent Capital Adequacy software solution can help you address challenges posed by capital adequacy regulations, download the brochure or contact us.

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