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new doors and doing new things,
because we are curious, and curiosity keeps
leading us down new paths.
A deep dive on CRR III changes and the impact on credit risk modelling

The reforms will force banks to examine capital use throughout their whole operation and maybe revise their pricing and product offerings as a result. As a result, the new framework will impact company strategy and business strategies. The BCBS anticipates that this will result in a capital reallocation within the system. Larger banks will need to concentrate on capital floors, but smaller banks will need to carefully assess what infrastructure and technology changes are required to handle the greater amount and granularity of data required by the most advanced standardised techniques.

Actuarial Data Science: Understand your risk factors thanks to Generalised Linear Models and Regularisation techniques

We intend to raise the awareness on how Data Science can be leveraged on in the context of insurance pricing and how to go from theory to practice, from scripting to deploying your model. This article is the first of a series of four articles on this topic. ​Understanding the risk factors and their impacts on the pricing is essential in risk assessment, particularly in a competitive market. In this process, generalised linear models combined with regularisation techniques can be useful. Moreover, GLMs help to understand what impacts your policy's pure premium so the product managers and brokers can effortlessly understand how the model works.

EBA publishes binding standards on Pillar 3 disclosures on ESG risks

On January 24th 2022, the EBA published its final draft implementing technical standards on Pillar 3 disclosures for Environmental, Social and Governance (ESG) risks. This article aims to summarise, contextualise, and critically assess the disclosures' essential aspects. It situates the disclosures within the larger spectrum of comparable disclosures of environmentally sustainable economic activities presented by other governing bodies in the EU. It discusses the different templates included and the timeline provided by the EBA for completing each set of disclosures. It offers preliminary methodological recommendations on key aspects of the disclosures based on Finalyse's internal requirements assessment. Eventually, it provides some general concluding remarks on Banks' challenges related to the disclosure of ESG risks.

The EU Securitisation Framework: A Bank and Insurer Perspective

Effective January 1st, 2019, the EU securitisation market has undergone a substantial overhaul in terms of the overall regulatory framework that governs the securitisation activities of the different players in the Member States. The overhaul represents a major milestone in the EU’s Capital Markets Union (CMU) agenda and includes several interrelated and complementary regulations. This article provides a general overview of the EU Securitisation Framework, highlighting its most key components and considerations from the perspective of banks and (re)insurers subject to the new requirements.

The new Insurance Recovery and Resolution Directive - what you need to know

We welcome the proposal by the EU to create a harmonised resolution regime via an Insurers Recovery and Resolution Directive. This will end the fragmented landscape of national resolution legislation and create a level playing field amongst EU member states. The IRRD will hopefully improve policy holder’s and claimant’s protection and reduce the amount of insurance companies bailed out by taxpayers. However, the Directive will create an additional administrative burden for insurers, so insurers will need to prepare accordingly for this Directive's extra work.

CRR 3 and Banking Package 2021 – The Winter’s Tale

On the 27th of October 2021 the European Commission has released its proposal of a new banking package, that (among other things) implements the first pillar of Basel IV into the banking regulation. This package introduces a big change to the European Banking industry. The combination of changes to the credit risk (which is the main risk driver in the EU), and output floor will be particularly strongly felt across the EU.The new requirements are computationally difficult and institutionally challenging. They require variety of tools and data all of which will be costly. The current release is a Commission proposal only and still needs to go through the council and the parliament before its release in the official Journal of the EU. However, it is not expected to undergo very many additional changes and its adoption should be smooth.

Unveiling the clockwork of the 2022 ECB Climate Stress Test

The article walks the reader through the different modules of the 2022 ECB Climate Stress Test. While we still find ourselves at the dawn of introducing climate risk into the existing risk management frameworks, the ECB continues to pave the way for financial institutions. In the methodology paper released in October 2021, the regulator has showcased their expectations for the upcoming bottom-up stress test. By elegantly side-stepping the intricacies of advanced climate modelling, financial institutions are enabled to start their climate stress testing journey while laying strong foundations for more advanced approaches in future exercises.

COVID pandemic: to what extent did the Basel standards improve the bank resiliency

Was the ability of banks to navigate through COVID 19 crisis substantially bolstered by the Basel reforms? The article draws on a series of studies conducted by BCBS. The studies mostly focused on what measures materially improved the bank resilience.

The Introductory Guide to the Challenges on the SFTR Reporting

This article introduces the reader to the regulatory background behind SFTR and outlines the challenges the new standards pose to market participants. The regulation was adopted to provide a more transparent disclosure of the securities financing market and to promote a better account of the risk posed by the interconnectedness via short-term collateralized funding and the reuse of the collateral. Although the regulation was published in December 2015, the associate Technical Standards were only approved in March 2019 with a phased in implementation that concluded in January 2021. This said, the time was short for market participants to adapt and acquire all the information required in over 150 fields.

VaR: An Introductory Guide in the context of FRTB

This article discusses the “Value at Risk (VaR)” metric and its use in the face of recent regulatory developments. The VaR is one of the industry’s most widely used metrics for risk management, though specific implementations vary significantly. In the last years, particularly following the introduction of Basel’s fundamental review of the trading book, the VaR became to be superseded by Expected Shortfall (ES), which is meant to better represent the tail risk. In both Var and ES, the methodology and the data are very important. This article also offers the steps that Finalyse takes to ensure that your VaR/ES models are optimal.