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11.09.2023
Econ Approves Solvency II Amendments

This article discusses the significant amendments to the Solvency II directive, a comprehensive review published by the European Commission (EC) in September 2021. The amendments, proposed after extensive research by EIOPA, were submitted to the European Parliament for evaluation and endorsement. The Committee on Economic and Monetary Affairs (Econ) within the European Parliament has recently approved a range of amendments to the EU's Solvency II rules and introduced a new directive focusing on the recovery and resolution of insurers. The article explores the impact of these approved changes on the regulatory framework for insurers operating within the European Union. After more than a year of deliberation, Econ members voted on compromises and amendments, leading to the majority approval of the Solvency II proposals. Furthermore, the article highlights the proposed implementation date of January 1st, 2026, for the amended directive, as put forth by Econ. This milestone marks a significant step toward reshaping the regulatory environment for insurers in the EU.

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07.09.2023
Autorité de Contrôle Prudentiel et de Résolution climate stress tests: Comprehensive overview of the 2023 exercise for French insurers

In July 2023, ACPR launched its second climate stress test which targets insurers. Focused on market risk and underwriting risk in various insurance lines, the exercise includes three long-term scenarios (up to 2050) and a short-term stress scenario (up to 2027). This article outlines the scenarios and ACPR's objectives with regards to addressing climate change risks. The timing coincides with the new requirement for climate risk analysis in insurers' ORSA, monitored by EIOPA from April 2023. The framework used in this exercise may be of interest to insurers outside of France, also, as they enhance their ORSA approach.

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04.09.2023
Data Management Toolkit

Explore the journey of enhancing risk management practices in major banks through BCBS 239 compliance. Learn how the Basel Committee's data management framework aims to improve risk reporting and decision-making, challenges faced by banks, and the pragmatic approach taken by Finalyse's data governance toolkit for efficient implementation.

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08.08.2023
Revised ECB Guide to internal models – continuous alignment within a changing regulatory environment

ECB's Revised Guide to Internal Models: Enhancing Risk-Weighted Asset Determination and Capital Calculation. Explore the incorporation of climate-related and environmental risks, support for simplified approaches adoption, standardized definition of credit risk default, measuring default risk in the trading book, and rules governing internal models for counterparty credit risk. Public consultation until Sept 15, encouraging feedback from banks and stakeholders. 60% of risk-weighted exposure amounts for credit risk among ECB-supervised banks calculated using internal models, amounting to €8.6 trillion in 2022.

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02.08.2023
Data preparation in credit modelling

Optimize credit risk model performance with meticulous data preparation. Transform raw data into structured format. Iterative process ensures relevancy over time. Explore, treat missing/outlier values, encode, scale, and transform variables. Select best model using data partitioning. Validate with training, validation & test sets. Ensure accuracy and reliability with statistically significant variables.

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27.06.2023
Credit Risk Analysis with Machine Learning

Credit risk analysis plays a crucial role in assessing the creditworthiness of borrowers. This article explores the application of various statistical techniques and machine learning algorithms for credit risk modelling. Apart from discussing the commonly employed techniques through their underlying principles and estimation techniques, the article also presents a case study involving a sample banking dataset containing demographic and credit bureau variables. Four algorithms are implemented and compared using performance evaluation metrics. The dataset is divided into training and testing datasets to assess model accuracy on unseen data. Important statistical tests are considered to ensure model validity. The article emphasizes the significance of selecting variables based on statistical significance and handling non-linear relationships. The findings contribute to the understanding of machine learning techniques in credit modelling and provide insights for better credit risk assessment.

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06.06.2023
Deep Dive into CRR3 - Real Estate in the revised Standardised Approach

Explore the impacts and challenges associated with the revised Standardised Approach, concerning real estate exposures. The implementation of Basel IV, specifically the 3rd Capital Requirements Regulation (CRR3), is rapidly approaching and has become a growing concern for banks. CRR3 – the EU translation of the Basel IV standards – aims to address the deficiencies of the pre-crisis package and enhance the credibility and comparability of banks’ capital ratios. One of the significant changes introduced by CRR3 is the limitation on the use of internal models, with an Output Floor restricting the benefits to 72.5% of risk-weighted assets (RWA) calculated using the Standardised Approach.

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05.06.2023
Solvency II 2020 Review

The European Commission has conducted a comprehensive review of the Solvency II Directive, based on the work of EIOPA. The proposed changes have been submitted to the European Parliament and Council for approval, expected in 2023. Member states will have 18 months to transpose it into national law. Updates to Delegated Acts and Implementing Technical Standards will be applicable soon. The proposed changes cover various key topics, including risk margin estimation, volatility adjustment, interest rate risk, and extrapolation of the risk-free yield curve.

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30.05.2023
Integration of transition risks into PD

Discover a pragmatic approach to integrating climate risk into credit risk models in this informative article. Since the release of the ECB Guidelines on Climate-Related and Environmental (C&E) risks, banks have been exploring ways to incorporate these risks into their frameworks. Stress testing and client-acceptance frameworks have been employed, but direct integration into risk models remains challenging. Finalyse offers a solution by presenting a conceptual framework that allows banks to make necessary adjustments during the model development phase. Learn how this approach addresses the limitations of historical data and enables banks to account for the dynamic nature of climate-related risks. Dive into the details of this data-driven implementation and enhance your understanding of the topic.

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22.05.2023
EMIR Refit Reporting

Discover the revised reporting requirements for derivatives under EMIR effective from April 2024. Learn how the European Market Infrastructure Regulation (EMIR) aims to enhance transparency and reduce risks in OTC derivatives markets. Explore the two categories of counterparties, the clearing obligations for CCPs, and the methods used to determine the types of OTC derivatives subject to clearing duty. Stay informed and compliant with the evolving EMIR framework and its impact on financial and non-financial entities.

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