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Credit
Our view of the change in IA focus from prior year to now:
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Banking and Capital Markets |
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Insurance |
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Investment and Private Equity |
2.1 Credit Risk Transformation |
Overview |
Regulatory challenges are forcing firms to re-examine the cost, efficiency, sustainability and transparency in the quantification techniques and systems used in the credit decisioning process. With the help of technology, firms are improving their end-to-end credit risk management process
in order to address these challenges, for example:
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IA's role |
IA has an important role to play in providing assurance over new or changed credit risk management systems, with a focus on ensuring solutions are aligned to the firm’s strategic objectives, the scale and nature of its business and its risk profile. Examples of IA focus areas include:
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2.2 Stress Testing |
Overview | In 2020, greater attention is expected to be given by firms to the adequacy of stress testing programmes. Regulatory developments are also expected to require focus over the year ahead as, for example the Bank of England, the Federal Reserve and the European Banking Authority (EBA) are all expected to reassess their respective approaches to concurrent stress testing for 2020 onwards. |
IA's role |
IA’s role should be focused on the following key areas:
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2.3 Model Risk Management |
Overview |
Regulatory expectations for model risk management continue to evolve for all firms using models in their business, with the scope, breadth and depth of model development, use and oversight activities all increasing. Supervisors will neither approve nor place reliance on the firm’s strategic and operational use of a model, including for risk assessment, capital planning and stress testing, unless satisfied with a firm’s model risk management. |
IA's role |
Regulators have specific expectations relating to IA’s role in Model Risk. IA is expected to carry out an overarching risk assessment of all aspects of model risk, drawing up multiyear IA programmes with targeted work plans structured to challenge the model governance framework and test the effectiveness of model risk controls. Particular areas of focus for IA should include:
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