Archive for the ‘Security and Compliance’ category

Basel III in Oman

August 18th, 2014

Oman is not yet one of the 27 national members of the BCBS.

However, the CBO has called upon Omani banks to comply with Basel III standards and issued guidelines on how to implement compliance to this standard which started phasing in from January 2013 and will continue until December 2018,- line with the global timeline set out in Basel III for the implementation of its reforms.

Will Basel III work in Oman, particularly with regards to Islamic financing? It seems so! HE Hamood Sangour Al-Zadjali, Executive President of the CBO, in an interview for the Oman Economic Review in April 2014, discussed Oman’s compliance with international best banking practices and stated:

“We have prescribed minimum regulatory capital for banks at 12 per cent of risk-weighted assets, much higher than that prescribed by the Basel norms. Moreover, the actual capital adequacy ratio is much higher at around 16 per cent. The CBO is well ahead in the implementation of Basel III framework, issued in November 2013. Some of the main features of these final guidelines prescribed by the CBO include: minimum common equity tier 1 ratio has been prescribed at seven per cent of risk weighted assets, while minimum Tier 1 capital ratio has been prescribed at nine per cent of risk weighted assets and the minimum total capital adequacy ratio has been prescribed at 12 per cent of risk weighted assets. All these norms … are in line with the international best practices prescribed by the Basel III.”

IMF staff reports U.A.E. – Basel 111 article 1V consultation

August 12th, 2014

The IMF published a staff report and a selected issues report last month for the 2014 Article IV Consultation with the United Arab Emirates. The IMF reveals that the authorities have stepped up the implementation of Basel III. They :

» Plan to phase in Basel III capital and liquidity standards over 2015–19

» To consult with banks about technical issues such as the definition of high-quality liquid assets, and a simple liquidity rule for smaller banks

Directors took note of the ample liquidity and capital buffers in the banking sector. They:

» Welcomed the recently introduced loan concentration limits

» Encouraged the development of domestic debt markets, which would support banks’ liquidity management in preparation for the introduction of the Basel III liquidity framework

Also see this IMF document:
This Staff Report was completed on June 11, 2014 and contains

- An Informational Annex prepared by the IMF.
- A Press Release summarizing the views of the Executive Board as expressed during its
June 26, 2014 discussion of the staff report that concluded the Article IV consultation.
– A Statement by the Executive Director for the United Arab Emirates.

Last month the Central Bank of the U.A.E. announced that the ratio of Emirati employees working at the Bank reached 64% at the end of the first half of 2014. The ratio of Emiratisation by job categories reached 100% within the leadership and Supervisory category, 71 % within the executive category and 44% within the specialised/technical category.

The Central Bank’s management has developed specialised training programmes to improve performance of staff, particularly national employees, in collaboration with leading international training institutions.

Meanwhile, the ratio of Emiratisation at national banks reached 34%, and 21% at non-national banks, with a total Emiratisation ratio of 32%. The Central Bank emphasises on all occasions the need for raising the ratio of Emiratisation in banking and other financial institutions in the U.A.E. and supports the call through its regulations issued in this regard.

Brisbane G20 – FSB – Central Banks and GLAC

August 6th, 2014

The FSB chairman and Bank of England Gov. Mark Carney sent a letter to G20 Finance Ministers and Central Bank Governors On 4 April 2014 about their plans for the November 2014 G20 summit to be held in Brisbane in November this year.

The letter summarises the priorities for completing reforms by the G20 summit in Brisbane. These are:
- ending too-big-to-fail
- transforming shadow banking
- making derivatives markets safer

Making resolution work in Europe and beyond – the case for going concern loss absorbing capacity was the subject of a recent speech given by Andrew Gracie, Executive Director, Resolution, Bank of England at the Bruegel breakfast panel event, Brussels Thursday 17 July 2014 . see

Some more unusually clear source of information on this topic Basel Committee Post Crisis Reform: “Finishing the job!” /em>
Laurent Clerc Director Financial Stability Banque de France

and this presentation:
The FSB Key Attributes of Effective Resolution Regimes Bail-in Framework by Ruth Walters

The problem of ‘too big too fail’ of course was discussed as long back as Cannes in 2011.
The FSB will publish a consultation on ‘gone-concern loss-absorbing capacity’ (GLAC), to assess the capacity of G-SIFIs to absorb losses when they fail. The FSB will be seeking agreement at the Brisbane Summit on three issues:
- the criteria that liabilities should meet to be considered as GLAC
- the appropriate amount of GLAC banks should hold
- where this should be held in the banks’ group structure.

An open issue is whether GLAC should be based on risk-weighted assets or on a non-risk-weighted measure. Thee is merit in both approaches. Using a risk-weighted approach would be coherent with Basel III capital requirements; but from an EU perspective, a non-risk weighted concept would be preferable, because this would be compatible with the resolution regime envisaged by the EU’s directive on bank recovery and resolution.

Big firms that straddle national borders present additional problems for regulators:
- Who exactly should take the hit when things go wrong?
- Which regulator should take the lead in sorting it out?
- What happens when different regulators disagree over what to do?
- Whose laws are applied when things go awry?

On the resolution of cross-border banks, the letter states that this must be supported by contractual or statutory approaches for cross-border recognition of resolution actions, including temporary stays on close-out and cross-default rights in financial contracts when a firm enters resolution, and bail-in of debt issued under foreign law. Mike Callaghan, programme director of the G20 Studies Centre at the Lowy think-tank in Sydney, Australia, says “that n agreement on resolving complex, cross-border institutions would be “pretty difficult to achieve by Brisbane”.

The FSB’s agenda will also tackle “shadow banking,” where non-regulated firms act much like banks and could pose a risk to the financial system.

FSB members are divided about the amounts of “bail-inable” debt that should be carried, and the form it should take, Japan officials argue that forcing banks to issue a single type of bail-inable bond ignores the fact that its own sector is heavily deposit-funded. Tokyo has already overhauled its resolution regime, and is not eager to do it again. France, too, seems reluctant to add new requirements for bail-inable debt on top of newly introduced EU-specific resolution rules. China ‘s state-owned banking sector seems clear that public money will be used in a crisis, and would see bail-in as a foreign concept. There is also debate about whether any surplus equity that banks are holding should be counted towards GLAC. Some Asian countries argue for this.

The proposals are likely to forward a numerical range for GLAC coupled with a second “pillar”, leaving considerable discretion to the national regulator when dealing with individual institutions.

The new framework will be applied to the list of 29 G-SIFIs after the consultation is completed and a ‘comprehensive’ impact assessment is

EBA Implementing Technical Standards (ITS)

July 8th, 2014

The European Banking Authority (EBA) today published an XBRL taxonomy to be used by competent authorities for remittance of data under the EBA Implementing Technical Standards (ITS) on supervisory reporting. \

It presents the data items, business concepts, relations, visualisations and validation rules described by the EBA Data Point Model (DPM) contained in the ITS on supervisory reporting, including the amendments relating to asset encumbrance, forbearance and non-performing exposures.

The reference date is as of 30 September 2014 onwards and it includes the first reports under FINREP.

The taxonomy defines a representation for data collection under the reporting requirements related to own funds, financial information, losses stemming from: lending collateralised by immovable property, large exposures, leverage ratio, liquidity ratios and asset encumbrance.

As part of enhancing regulatory harmonisation in the EU banking sector and facilitating cross-border supervision, uniform data formats are necessary to enable comparable data on credit institutions and investment firms across the EU.

The EBA XBRL taxonomy was primarily developed for data transmission between competent authorities. The EBA, many authorities have been using it for the collection of supervisory reporting from the credit institutions and investment firms they supervise. The taxonomy proposed by the EBA will lead to convergence of supervisory practices across Members States and also facilitate supervisors to identify and to assess risks consistently across the EU and to compare EU banks in an effective manner.

The updated taxonomy issued today incorporates corrections to the COREP and FINREP reporting structures in line with the published ITS, and new reporting structures for asset encumbrance.

It includes the following technical documents:
• The set of XML files forming the XBRL taxonomy
• A description of the architecture of the XBRL taxonomy
• The DPM of which the taxonomy is a standardised technical implementation, includes both database and document representations, along with a description of the formal modelling approach on which it is based.

Date of applicability
The existing taxonomy (2.0.1) related to the September 2013 framework release is to be used for remittance to the EBA for reports with reference dates prior to 30 September 2014.

Reports with reference dates as of 30 September 2014 and beyond are to use this revised taxonomy (2.1), which is related to the March 2014 framework release. Remittance of FINREP reports will, therefore, commence using this revised taxonomy.

Legal basis and next steps
This XBRL taxonomy was developed based on the final draft ITS on supervisory reporting including amendments regarding asset encumbrance, forbearance and non-performing exposures (and incorporating some revisions arising from the publication and adoption process of the Commission Implementing Regulation (EU) No 680/2014) and in accordance with Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms (Capital Requirements Regulation – CRR).

While the original ITS were adopted by the European Commission and published in the Official Journal of the European Union on 28 June 2014, the ITS amendments regarding asset encumbrance, forbearance and non-performing exposures are pending adoption and publication. Hence, this taxonomy is subject to further necessary revisions following the publication and adoption process and based on any critical technical corrections that may be identified.

Later this year, the EBA expects to publish a further revision of its XBRL taxonomy incorporating further alignment corrections, and additional reporting requirements regarding funding plans, which is expected to be used for reports with reference dates as of 31 December 2014 and beyond.

It seems probable that similar reporting formats will be introduced to this region. So consider this when selecting your regulatory reporting solution, BRS Analytics data model and report outputs have already been extended to meet the COREP and FINREP requirements.

FATCA – now in effect from 1 July 2014

July 2nd, 2014

Does the Foreign Account Tax Compliance Act (FATCA), affect you? The legislation came into full effect on the 1st of July 2014 and has many implications, particularly for US expatriates and for financial institutions with which they deal.

FATCA, a U.S. tax avoidance measure that requires foreign (non- U.S.) financial institutions (FFIs) to identify, report on and, in some circumstances, withhold on payments to account holders. The point of FATCA is increase transparency for the IRS with respect to U.S. persons that may be investing and earning income through non-U.S. institutions. FATCA imposes tax withholding where the applicable documentation and reporting requirements are not met.

U.S. taxpayers owning financial assets in excess of $50,000 in foreign accounts must report those assets every year on a new Form 8938 to be filed with the 1040 tax return.

The law requires foreign financial institutions (FFIs) to enter into an agreement with the Internal Revenue Service to identify their U.S. account holders and to disclose the account holders’ names, tax identification numbers, addresses and the transactions of most types of accounts.

FFI’s are now required to report the following:
1) The name, address and U.S. tax identification number (TIN) of each account holder that is a specified U.S. person;
2) In the case of any account holder that is a U.S. entity with one or more U.S. owners, the name, address and TIN of each substantial U.S. owner of such entity;
3) The account number;
4) The year-end account balance or value; and
5) Gross receipts and gross withdrawals or payments from the account.

If an FFI does not enter into an agreement with the IRS, all relevant U.S.-sourced payments, such as dividends and interest paid by U.S. corporations, will be subject to a 30 percent withholding tax.

Many Americans residing overseas are faced with ‘banking lock-out’ because financial institutions have in some cases chosen to eliminate their US client basis to minimize their exposure to FATCA reporting requirements, withholding fees and potential penalties.

While there is speculation that this law will make it less desirable for foreigners to do business with Americans and even a reduced desire to hold dollar-based assets there is still a need for Middle East FIs to address this reporting requirement.

US citizens working here should seek independent financial advice or speak to a tax advisor for more information and visit the IRS website –

(From Notice 2014-33: Comments received after the publication of the temporary Chapter 4 regulations have indicated that the release dates of the final Forms W-8 and accompanying instructions present practical problems for both withholding agents and FFIs to implement the new account opening procedures beginning on 1 July 2014. In consideration of these comments, the US Treasury and the IRS intend to amend the Chapter 4 regulations to allow a withholding agent or FFI to treat an obligation held by an entity that is issued, opened, or executed on or after 1 July 2014, and before 1 January 2015, as a pre-existing obligation for purposes of implementing the applicable due diligence, withholding, and reporting requirements under Chapter 4. The proposed amendments to the Chapter 4 regulations will only be available to obligations held by entities. ) This user guide FATCA XML V1.1 sets out the xml schema and the information required in each data element.

Once FFIs register with the IRS through the agency’s website, they will receive a notice that the registration has been accepted and will be issued a Global Intermediary Identification Number (GIIN), to be used for reporting purposes. Approximately 77,000 banks and financial institutions from 70 countries have already registered, according to news reports. Reuters reported that more than 500 U.S. businesses have also registered, including Citibank and JPMorgan Chase. As of June 13, 2014, 36 nations had signed agreements with the IRS, including Australia, France, Germany, Japan, Mexico, South Africa, the United Arab Emirates and the United Kingdom. Many places where Americans have traditionally hidden assets, including Switzerland, the Cayman Islands and the Bahamas, have signed agreements as well. Forty-two other nations have reached “agreements in substance.”

The IRS issued a notice in May 2014 announcing that calendar years 2014 and 2015 will be regarded as a “transition period” for FATCA enforcement. The transition period is “intended to facilitate an orderly transition” for financial institutions struggling to achieve FATCA compliance, according to the IRS.

Take note that the July 1, 2014, effective date is not postponed and the legal obligations imposed by FATCA have not changed. “An entity that has not made good-faith efforts to comply with the new requirements will not be given any relief from IRS enforcement during the transition period,” the notice states.

The IRS is just letting the international financial community know that a good-faith attempt at compliance will be acceptable until January 2016. Instead of aggressive policing of reporting accuracy, the IRS may check on the status of FFIs’ filing of W-8 and W-9 forms and take into account whether a withholding agent has made reasonable efforts to modify its account opening practices and procedures.


July 1st, 2014

According to Price Waterhouse Cooper’s ‘Banking Banana Skins 2014’ survey, published last motnh new regulations are becoming excessive and could dampen economic recovery and growth.Regulation topped the list of risks among the region’s banking industry. The poll is based on responses from more than 650 bankers, banking regulators and close observers of the banking industry in 59 countries.

A fast-rising risk in the Banana Skins ranking is technology risk, which has risen from No. 18 to No. 4,

Azure – new back up solution – Azure Site Recovery (ASR)

June 28th, 2014

No backup data center?

Microsoft Azure Site Recovery will keep applications and services running on the cloud should disaster strike.

Microsoft cloud-based disaster recovery is coming with Azure Site Recovery (ASR)).

Abhishek Hemrajani, a Microsoft program manager,in the company’s official blog announced new capabilities that enable disaster recovery (DR) in the cloud. Enterprise and small and midsized businesses (SMBs) “can now protect, replicate, and failover Virtual Machines directly to Microsoft Azure.”

In short, a cloud-based DR site that can span multiple geographies.

ASR, formerly Hyper-V Recovery Manager, provides a guaranteed safety net, whether customers “enable Disaster Recovery across On-Premise Enterprise Private Clouds or directly to Azure,” said Hemrajani.
He added that “virtualized workloads will be recovered accurately, consistently, and with minimal downtime.”

Businesses no longer need to view cloud-based DR with suspicion, according to Microsoft’s Brad Anderson, corporate vice president of Windows Server and System Center. “If you’re an enterprise that has viewed previous cloud-based DR solutions with skepticism—brace yourselves for the details of this announcement,” he said in a statement. – See more at:

Cumulative Update #2 for SQL Server 2014 RTM

June 28th, 2014

Fix for the index corruption issue is now available for SQL Server 2012 Service Pack 2 – available for download for via the hotfix download link in the KB article. See KB

Health data on the internet – good or bad?

June 28th, 2014

The new “Google Fit” health data tracking service will compete with Apple’s recently announced HealthKit data collection services, according to a report.

Google will debut its plans for a new health data tracking service called “Google Fit” at the upcoming Google I/O developers conference as part of its recent push into high-tech wearables. – Google has also been working recently on other device-related health projects, such as experiments unveiled in January with special contact lenses that are equipped with miniaturized sensors that can analyze the tears in the eyes of diabetes patients to determine when their blood sugar levels need to be adjusted. – See more at:

It seems perverse coincidence to read on the same day that possibly 1.3 million records were stolen when hackers broke into Montana’s health care system presumably with the intent of identity theft. , Montana has taken the steps necessary to shore up security. Government officials have confirmed that the personal information of 1.3 million people has been hacked. State of Montana officials are now notifying potential victims that hackers broke into a Department of Public Health and Human Services (DPHHS) computer server

Captial requirements for credit risk – new ECB consultation paper

June 28th, 2014

26th June 2014, Brussels: The European Banking Authority (EBA) has just released a consultation paper pertaining to the sequential approach of the Internal Ratings-Based (IRB) approach to capital requirements for credit risk. This paper also covers the limited permanent use under the Standardised Approach (SA) (Articles 148 (6), 150 (3) and 152 (5) of the EU Regulation 575/2013 under the Capital Requirements Regulation (on prudential requirements for credit institutions and investment firms).
Following its release, the EBA is inviting proposals, particularly relevant questions and/or points the body should take into consideration up till the 26.09.2014, following which it will subsequently submit the draft Regulatory Technical Standards (RTS) to the commission by the 31.12.2014. The Authority, following analysis of potential pegged costs as well as associated advantages, has also requested the option of the Banking Stakeholder Group (BSG) as per Article 37 of Regulation (EU) 1093/20102.
Supplementing EU Regulation 575/2013, this consultation paper assumes that specific exposure categories may be treated under the Standardised Approach permanently, depending on a predetermined subset of criteria (materiality of size and risk of the exempted exposures). This permanence will also prevail in situations where technical or operational difficulties are encountered during the deployment of the IRB approach. As a general rule of thumb, the paper advises that “competent authorities should ensure that the higher the potential for underestimating the risks stemming from its design, the quicker this potential should be reduced.”
The adoption of this regulation is sectioned into the following facets:
Article 1 defines the General principles related to all the relevant ‘exposure values’ and their associated ‘risk-weighted exposure amount’. Specifically, a) equity exposures as referred to in Articles 133 (1) and 147 (6) of Regulation (EU) No 575/2013 and b) all exposures for which the institutions have received permission to apply the Standardised Approach on the basis of Article 150 (1) (d) to (f), (i) and (j) of Regulation (EU) No 575/2013.
Article 2 defines the conditions of application of points (a) and (b) of Article 150(1) as per Regulation (EU) No 575/2013, related to conditions such as the aggregate threshold of 8% of all exposures as well as the aggregate risk-weighted exposure amount assigned to the class similarly does not exceed 8%; as well as the consideration to counterparties being materially significant (>= 10% total exposure of the institutions eligible capital). Article (2) also takes into consideration accessibility and availability of information, cost of developing the said ratings system as well as the institution’s operational capability to determine suitability for such rating-system implementation.
Article 3 treats the relevant conditions of point (c) of Article 150 (1) insofar as to application the SA being limited to classes or exposure types whose magnitude as well as risk profile is considered immaterial.
Article 4 deals with the specific conditions according to which competent authorities shall determine the various characteristics as well as scheduling of the successive IRB rollout. Contained within Article 148 (3) of the regulation, this consultation paper advises that (competent authorities) “shall ensure that the higher the potential for underestimating the risks, the quicker this potential shall be reduced” as well as sets forth a series of conditions that need to be adhered to insofar as permission being granted to apply the IRB approach. These include total exposure value and total risk-weighted exposures >= 50% of the set relevant exposures. Following the inclusions of the IRB Approach for a particular exposure class, Article (4) also states a set of considerations the EBA will take into account for an institutions’ rollout timing. These incorporate the availability of time series data, the institutions capability, acumen and preceding experience in developing the rating system as well whether there are occurrences of tied affiliates to the institution who are not subject to Regulation (EU) No 575/2013 or to the corresponding respective country’s legislature.
Article 5 decrees that the regulation shall come into force on the twentieth (20th) day following “its publication in the Official Journal of the European Union”
EBA Consultation Paper – Deadline 26th September 2014
Regulation (EU) No 575/2013 of the European Parliament and of the Council on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012
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BASEL 111 and BCBS 239 what does it mean for Middle East banks?

June 28th, 2014

A BI vendor surveyed banks in in December 2013 in Europe, North America and Asia-Pacific to explore data governance initiatives, highlights the need for Board-level representation and ownership to ensure that data governance frameworks meet the business objectives. Data governance has become more important following the global financial crisis, yet over two thirds (63%) of financial industry executives do not consider it to be a Board-level issue. .
The study also showed that one third (31%) of financial institutions do not have defined roles and responsibilities in the data governance space. despite the many business drivers for data governance in the financial world.
Achieving regulatory compliance and r educing regulatory risk .was recognized by 94% of banking executives as a business driver, followed closely by ensuring data consistency across the enterprise (88%) .and improving transparency of financial data and information (63%). Why the change of heart?
The Basel Committee on Banking Supervision’s BCBS 239 principles paper was introduced to transform the way risk data management and reporting is carried out internationally. It requires that be underway to meet their January 2016 deadline.
Originally released for comment in June 2012, the 14 principles of BCBS 239 cover a lot of ground, addressing areas ranging from IT infrastructure and governance arrangements, to the way that risk management departments generate ad hoc reports.
The BCBS 239 principles also affect G-SIBS (those subject to additional capital requirements), and additional D-SIBS requirement defined by local central banking authorities, who will only have three years to meet compliance.
The list of principles may seem overwhelming, and time is running out. Covering everything from IT infrastructure to governance and timeliness, the principles are an opportunity for firms to renovate, innovate, and proof their business with the most effective people and processes in place.
Three questions, to help you decide on an action plan for compliance on schedule and to also support growth and productivity.
1. Current status?
What are your real Strengths and Weaknesses, Opportunities and Threats on data risk management compliance?. In future supervisors will require documentation and proof, and this means you need a formal system and processes.
2. Which IT systems do you use now – are those adequate?
Near real-time aggregated data is key for timely alert to risk. BCBS’s report, ‘Progress highlights that banks feel they do have a compliant with strong IT infrastructure and data architecture.
Is your technology efficient and effective? Scalable and agile?

3. Do you have the right people on the job?
Risk management comes down to people. Technology can maximize their essential productivity in processing data, and reduce errors with in-built validations and standard data transformation and aggregation , with comments, logs, version controls and audit trials, risk. Help them better to manage risk by turning data into timely intelligence with kpis to manage, report and inquire on information.
The BCBS 239 framework can be broadly categorised into 4 main pillars.
“Pillar 1 Governance and Infrastructure.”
Governance entails implementing appropriate organisational and process structures to ensure that risk aggregation receives the same strategic importance of any of the bank’s other business critical processes.
This encompasses day to day management structures and the senior management and C-level ownership of risk data.
This Pillar requires organisations to put in place the right kind of technology and process infrastructure, not only for risk aggregation requirements, but also to offer an extensible framework that will allow easy incorporation of newer forms of risk and sudden spikes in computation capabilities in stress or crisis scenarios.
Pillar 2 “Risk aggregation” .
A bank must ensure that it has in place the right capability and resources to provide:
◾Accuracy and reliability via data quality processes
◾Adherence to an “enterprise data dictionary”
◾Well documented unambiguous processes – either automatic or manual
◾Completeness in terms of data usage and coverage
◾Consistent latency for aggregating risk within agreed SLAs
◾Flexibility and adaptability to provide new aggregations easily
Pillar 3 “Risk reporting”
The supervisors will need to be confident confident that the bank has a suitable risk reporting infrastructure that is:
◾Accurate with appropriate data quality processes
◾Comprehensive – covering all the agreed risk across agreed organisational entities i.e. asset classes, organisational structures, locations, counterparties, etc.
◾Clear, intuitive and useful for the end users to easily comprehend
◾Available and refreshed at agreed frequencies
◾Distributed to the users using appropriate content distribution processes
Pillar 4 “Review, Collaborate and Act”
Timely reports on aggregated risk data should be available. Supervisors require appropriate means to review the aggregated risk output, to inquire further and to make any remedial changes as part of the workflow.
Data Accuracy
Another essential factor to consider is data accuracy. Most big banks tell us they still struggle with data quality issues. Large global banks are often the product of complex mergers, that involves its own set of data and technology challenges. Banks have multiple systems introduced often ad hoc for new revenue streams from different asset classes. The systems were never designed to capture the data in a manner to support the reporting required by regulators. There is often very little integration in the front office and there are often more than 50 systems and subsystems that hold data. Each desk has its own: trading, booking, pricing and reporting systems. New product are then built on those legacy systems and copy data from middle-office risk aggregation systems and may receive risk in more than one data channel for the same asset class,. Risk managers need to know what is the real risk and it is not practical to do this efficiently or in a timely manner form front office systems aggregate din Excel.
The completeness and quality of data in the back office is more important than the mathematics underlying risk calculations in the front office. If you don’t have the right information, at the right time about a position, (or don’t even know it exists) then your risk calculations are irrelevant. IT investment in integrating and normalising banks data is even more important than updating risk engines. Consider whether your reporting solution should embed a risk engine maintained by the software author in lien with regulatory requirements.
BCBS requires board level review of the risk data aggregation for new product approval and also for other strategic business decisions such as: mergers, spinoffs and acquisitions. The uncertain nature of financial markets, makes it both more difficult and more important for investment banks to build an agile infrastructure and reporting capabilities to make faster and better informed investment and decisions.
There is an overlap of what BCBS 239 prescribes and similar initiatives supporting other regulatory frameworks (e.g. Basel III, MIFID II, COREP, CRD IV, etc.). Forward-looking finance executives are using high-performance technologies to create fundamentally superior, compliant risk reporting processes which also help executives meet their goal of sustainable profitability.

Buy vs Build?
KPMG’s Managing the data challenge in banking advises that firms needs to ask themselves whether they have a clear Data Architecture to support the principles of Risk Data Aggregation and whether they are able to create future data capabilities that will enable them to comply with the BCBS principles by the required deadline of 1 Jan 2016.

In Deloitte’s 2013 global risk management survey, only 31 percent of respondents said that their data quality efforts were effective and only 20 percent were confident in their data management and maintenance efforts. Their advice? Automation.

Ask us about BRSAnalytics – purpose built for bank regulatory reporting.
Hasan: 0097143365589

Central Bank of Kuwait – Implementation of the Instructions of Basel III Capital Adequacy Standard

June 24th, 2014

Press Release by H.E. the Governor of the Central Bank of Kuwait Regarding Implementation of the Instructions of Basel III Capital Adequacy Standard in its Final Format to All Local Banks (24/6/2014)

His Excellency, the Governor of the Central Bank of Kuwait (CBK), Dr. Mohammad Y. Al-Hashel, stated that the CBK’s Board of Directors approved, in a meeting held on 24.06.2014, the instructions of Basel III Capital Adequacy Standard in its final format for both conventional and Islamic banks, having already adopted on 24.12.2013 the regulatory capital structure and the transitional phase for implementation thereof in the light of the positive outcomes of the Quantitative Impact Study (QIS) reflecting the ability of banks to meet Basel III capital adequacy standards – despite the additional requirements with respect to regulatory capital.

“In July and August 2013 draft Basel III instructions have been issued to conventional and Islamic banks to implement these instructions in parallel with Basel II instructions and, accordingly, such banks shall provide CBK with Basel II capital adequacy statements on a quarterly basis along with Basel III statements until 31.12.2014,” Dr. Al-Hashel said.

“Basel III Capital Adequacy Standards incorporate some major amendments to Basel II Capital Adequacy Standards – representing an increase in the overall ratio of regulatory capital, whilst at the same time re-defining regulatory capital, coupled with standards that aim at improving its overall quality. Among these standards are i) setting minimum limits for the items in the form of common equity; ii) setting additional margins in the form of conservation capital buffers and counter-cyclical capital buffers; iii) setting stricter terms for Tier II Capital; and iv) rescinding Tier III (which was allowed under Basel II), in addition to further ratios for those banks identified as domestically systemically important banks (D-SIBs),” he highlighted.

“As the CBK is firmly committed to implementing Basel III reforms and guidelines, the CBK, since the issuance of such set of reforms, has initiated actions necessary to apply these guidelines, whereby the State of Kuwait will be in the forefront of countries applying best international banking control standards. Kuwait’s initiative to be one of the first countries to implement Basel II was welcomed and appreciated by global institutions, and served as a boost to the reputation of the CBK’s supervisory authority and the Kuwaiti banking sector on a global level, including global credit rating agencies as reflected in an upgrade in the credit rating of the Kuwaiti banks,” Dr. Al-Hashel continued.

The Governor added that the CBK is moving forward toward accomplishing the other standards of Basel III set of reforms – viz leverage ratios and liquidity ratio standards according to a well-planned schedule and taking into consideration the QIS outcomes.

The Governor said that “final Basel III capital adequacy standard instructions are now published on the CBK website for those interested in the banking and financial business.”

“The CBK is constantly upgrading its regulatory tools in line with best practices so as to reinforce banks’ resilience to financial shocks, whilst capitalizing on well-balanced and gradually introduced regulatory policies that aim to strengthen the banking and financial system, without negatively affecting economic growth,” he concluded.

Middle East Bank Regulatory reporting getting tougher.

June 22nd, 2014

I have just returned from what is becoming a regular trip to Kuwait after also meeting with man\y banks in Abu Dhabi and Dubai. Meetings with many of the banks has highlighted the increasing burden of regulatory reporting driven by a zealous Central Bank and imminent new Basel lll requirements.

This month there have been statements and white papers from Central Banks in the region to notify that to ensure sound banking practices are enforced.
the regulations will get tougher as the year progresses

The need for comprehensive Regulatory Capital Compliance in the Middle East is similarly seen in KSA where an implementation date for Basel iii was announced as long back as January 1 2013, with its regulated banks due to report under Basel iii in due course.

This change in the regulatory landscape, together with its ambitious commercial
strategy and wish to become internal ratings-based (iRB) compliant, challenges the way banks manage regulatory capital data, and the capital calculations.

Over the last 6 months it is evident that banks are increasingly aware that for regulatory reporting. the current largely manual compliance and reporting processes need to be automated, to enhance the timeliness, efficiency and accuracy of regulatory capital calculations and regulatory reports.

Part of the challenge is that core banking systems were not designed to generate such returns. Data is typically spread across multiple back office systems and spreadsheets. Another challenge is that banks that operate internationally may need to report the same data to multiple regulatory authorities in different reporting templates. Central banks are also looking to automate their own regulatory reporting efficiency and there is a gradual move to digital reporting e.g. via XBRL format.

Enterprise Data Consolidation into a central data platform is the key to streamlined and accurate regulatory capital compliance and reporting. Standard Microsoft SQL technologies such as SSAS, SSIS, and SSRs can then manage the ETL process and data validation and aggregation. Risk and other calculation engines with built-in calculations for Basel ii and Basel lll compliance provide a single platform for reporting. The required data can then be surfaced from underlying data cubes into specific central bank formats, typically in Excel.

It is not efficient for each bank to have to study complex regulations and to each develop the same report, in discrete systems that are individually maintained. Banks need a productized, out-of-the-box solution ,which embodies: approvals, audit trails, and kpi dashboards, and industry standard security, built on a standard configurable framework. This provides a common platform for support, and makes it much easier to introduce report modifications and even new reporting requirements.

Central bank regulatory requirements are essentially the same globally and reflect international compliance to accords like Basel ll and FATCA, COREP and FINREP etc. This means the underlying data model can also be common, though local calculations and report output formats. With a common model , report format changes can be incorporated by the software author to the benefit of all. This not only reduces the cost, time and risks of implementing a regulatory compliance solution but also the ongoing maintenance and the need to incorporate new reporting requirements.

in addition to streamlining compliance, automating regulatory capital management helps to augment overall business management. The underlying data warehouse can also be used to create internal MIS reports. Consolidated regulatory capital data allows a bank to fully reconcile its risks with its balance sheet. This single version of the truth enables the bank’s senior management to understand its risks, and to ensure the bank is properly capitalized to meet the needs of both the regulator and the business.

An SSAS data warehouse allow powerful data ‘drill down’ to understand the breadth and depth of the risks that banks manage and how these change over time. Managers are fully informed, to take risk-based decisions, based on the bank’s business strategy.

BRSAnalytics is a purpose built solution for regulatory compliance and management control. It is not a BI tool that has been adapted. It is a purpose built solution that embeds regulatory knowledge and is built on industry standard technology. Such a system helps a bank’s directors to meet their personal Corporate governance obligations. it provides key stakeholders and management a comprehensive toolset to manage its risks, its capital and its business strategy.
The solution is proven over the last 7 years with 100% implementation success.

“By automating the process of data gathering, it has significantly reduced time spent on otherwise unnecessary internal regulatory computation maintenance.”
Alan Bartoli, ICT & Operations Officer (Izola Bank plc)

In holding in-depth discussions regarding BRSANALYTICS, it was evident that the solution was well thought out and backed by a knowledgeable implementation team with the necessary expertise to cater for our regulatory needs. The simple fact that it condenses all the data to produce one single accurate report made it the obvious choice in treating this monthly burden with confidence and efficiency.”
Anthony Schembri, Managing Director (Raiffeisen Bank)

Ask for a copy of the Fimbank Case Study:
“…providing a wealth of functionality such as drill-downs”
“…enable business users to analyse and respond to regulators’ queries”
“…Drastic Reduction of Data Collation and Verification Time”
“…the Bank has been able to dramatically reduce the time it took to prepare regulatory reports by at least gaining 75% efficiency”
“…now, we are able to do the same process in a fraction of the time. This is remarkable”
“…This has given its members the time to focus on primarily ensuring a more qualitative output and submission to Regulators”
“…I’m very happy to say that because of BRSANALYTICS, we have achieved this goal”
“…Better Insight”
“…Easy Localisation”
“…deploying the solution has proven to be a game changer”
“…we are now able to focus on other important assignments”
“…gain better insight on our financial activities, be more productive and improve our decision making due to the use of business analytics

New U.A.E. bank regulations to strengthen prudential framework – Basel lll, FSR, LCR

June 16th, 2014

According to Price Waterhouse Cooper’s ‘Banking Banana Skins 2014’ survey, new regulations are becoming excessive and could dampen economic recovery and growth. The poll is based on responses from more than 650 bankers, banking regulators and close observers of the banking industry in 59 countries.

The UAE banking sector to face stringent capital and liquidity rules. The Financial Stability Report hints at regulatory overhaul to align local regulations with international best practice. The Central Bank of UAE is in the process of reviewing and updating banking sector regulations to align local regulations with international best practice, according to the Financial Stability Report published by the apex bank on Sunday. The review will take into account specific requirements of the UAE economy. The report said the changes will require banks to hold capital in line with the requirements of Basel III rules, a set of international capital adequacy standards.

“New regulations aim to strengthen our prudential framework in line with the latest international developments and Basel III guidelines,” said Sultan Bin Nasser Al Suwaidi, Governor of the UAE Central Bank in the preface of the report.

Over the next few years, the regulatory reforms introduced by the Basel Committee for Banking Supervision under the Basel III framework, will significantly influence the development of the capital and liquidity regulations for banks operating in the UAE.
The new regulatory reforms are expected to impact both the quality and quantity of available regulatory capital at banks and the introduction of a new liquidity regime in the UAE. The new capital regime will include requirements for enhanced capital in terms of quality and quantity and the application of a new leverage ratio. The definition of capital will also change with a higher emphasis on paid-up capital, retained earnings and disclosed reserves.

In accordance with Basel III, the timeframe for full implementation of the new capital regime is end of 2018. The Central Bank said it intends to begin the engagement process with banks towards implementing the new capital regime, including consultation on the new regulations, in the second half of 2014.

The Central Bank Central Bank is currently in the process of finalising new liquidity regulations for banks operating in the country. The regulations emphasise the need for each bank to have a proper liquidity risk management framework in place to minimise the likelihood of a liquidity stress occurring and also minimise the impact on the bank should such a stress occur.

In developing such a framework, the Central Bank will require each bank to hold sufficient liquid assets that are of the highest quality to ensure that they will be able to meet their individual liquidity needs on an on-going basis — especially in a stress scenario.
The regulations will take into account national discretions outlined in the Basel III liquidity standards and the timescales for implementation of the Liquidity Coverage Ratio (LCR).

These regulations are expected in the second half of 2014 and the Central Bank intends to engage closely with all banks to ensure a smooth implementation of the LCR in the UAE.

Prophix Corporate Performance Management – Free Seminar, Dubai 23 June 14

June 14th, 2014

This our fourth CPM seminar with Microsoft. Synergy software Systems is the certified Regional Distributor for Prophix.

PROPHIX delivers a unified Corporate Performance Management software solution that empowers business users.

Designed to deliver value, with minimal IT support, PROPHIX automates time consuming processes, improves data accuracy, and gives you the ability to react rapidly to changes in your business environment.

PROPHIX is a complete CPM solution for budgeting, planning, forecasting, reporting and financial consolidation. There are no separate or add on modules. You can start to use PROPHIX quickly and implement only the functionality you need, and be assured that PROPHIX will continue to deliver value as your company and performance management requirements evolve.

Visibility into all levels of your organization
• Improve operational performance
• Automate your company’s financial processes, including:
o Budgeting, planning and forecasting workflow, and data
o Reporting and analysis – automate report distribution
o Financial consolidation – full audit trails, multi currency,
o Operational planning – e.g. detailed manpower planning

Register now – Places are limited.
Tel #: +971 4 3365589 / 3374282 Fax #: +971 4 3379885
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