Risk and capital adequacy process (ICAAP) review
The brief
A tier one global bank contracted us to lead an RWA programme following on from the success achieved within the client’s EMEA legal entity. The client wanted to replicate this accomplishment within their Asian entities and thus the objective was to utilise the Internal Ratings Based (IRB) approach, an advanced methodology requiring subject matter expert (SME) knowledge, across their three largest branches.
Our approach
Our specialist team reviewed the banking book balance sheet across the client’s Asia Pacific business to investigate opportunities to optimise its credit RWA position. We evaluated RWA processes, methodology, policies, and data flow by applying more than 40 tried-and-tested themes.
Programme execution was split across 2 phases:
- Phase 1: Identification – bottom-up desktop analysis of RWA reports and proof of concept;
- Phase 2: Remediation – delivery of any identified themes for RWA optimisation, including programme set-up and execution, build templates, structure and programme plan, and delivery of prioritised workstreams.
The solution and key benefits
The programme identified multiple opportunities to optimise the client’s RWA position. Enhancements were made to the policy framework, underlying data, and operational processes to maintain optimised RWA results in a sustainable manner.
The client benefited from a material improvement in the RWA capital requirement (c. 10%) along with sustainable improvements to underlying data management, policies and operational processes.
In addition, the programme delivered improved ROE and increased client profitability.
