AxiomSL has added a solution that meets the requirements of Basel’s Standardised Approach for Measuring Counterparty Credit Risk Exposures (SA-CCR) to its regulatory reporting platform ahead of the rule’s compliance deadline of January 1st 2017.
SA-CCR will replace the Current Exposure Method and Standardised Method calculations enshrined in the Capital Requirements Directive IV (CRD IV) and require banks to use a new methodology to calculate exposure to counterparty credit risk and corresponding capital reserves needed to mitigate the risk. The rule will be mandatory for all over-the-counter derivatives, exchange-traded derivatives and long settlement transactions.
AxiomSL’s SA-CCR solution is built on the company’s core regulatory reporting platform, which will also support forthcoming Basel capital calculation requirements including the Fundamental Review of the Trading Book (FRTB), which is expected to be implemented in January 2019, and the Interest Rate Risk in the Banking Book (IRRBB), which is likely to come into force in 2020.
The solution can be deployed in-house or used as a software-as-a-service hosted by AxiomSL. It allows banks to run impact analysis assessments to understand how SA-CCR will affect their capital requirements, automates the computation of exposure at default, and provides potential future exposure and replacement cost calculations.
Ed Royan, chief operating officer at AxiomSL, says: “The calculations in SA-CCR are more sensitive and have a larger data requirement than those currently being used. This could be a challenge as some of the data is not easy to source, for example data around agreements. Some banks may have the data, but others will have to source data from third parties.”
To ensure users of the AxiomSL regulatory platform are sourcing the right data for SA-CCR, the company is working with an investment bank and other clients to define the rule’s specific data requirements. It is also working with clients on impact analysis and is analysing the draft rules of FRTB in the run up to developing a solution later this year. Work on IRRBB will follow.