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December 12, 2017
Basel Rules and their European Counterparts

A number of our customers were slightly unclear about the way Basel rules are translated into the European framework. This expert input took it on itself to examine how BCBS standards get translated into European Legislature and what their European counterparts are. To some extent, some confusion is understandable. European lawmakers – after all - make many changes, so much so that the European law is in fact materially non-compliant with Basel standards. This article examines the way in which the main component of the new (but pre December 2019) Basel standards are likely going to differ once implemented in the European Union. More specifically, the article examines the leverage ratio, Net Stable Funding Ratio and FRTB. The adoption of 2017 BCBS document may have rendered parts of this paper obsolete.

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December 10, 2017
Machine Learning in Risk Management

This Expert input works as an overview of the basis of most available machine learning techniques and serves as a great stepping stone to get into the intricate world of ML. Whilst mostly written with credit risk in mind – offering some advice for the use of machine learning to help us model Expected credit loss and its components (PD, LGD, EAD), the list of the potential techniques depicted steps far beyond this relatively singular use and examines a multitude of approaches, ranging from Supervised ML (Decision trees, Artificial Neural networks, etc.) through ensemble ML (Random forests, Gradient boosting), to unsupervised ML (Deep learning, Clustering methods, etc.). The input concludes with several general tips and tricks regarding machine learning.

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December 04, 2017
IFRS 17 and its impact on the insurance sector

This Expert input gives a basic overview of IFRS 17 and how it is going to be different from the current standards (IFRS 4). We note that there are some similarities between some of the aspects of Solvency II and IFRS standards and examine them, as well as the differences. Furthermore, there are predictions on how the standards are going to influence the operations of insurers and their contracts. Since the insurers are likely to implement IFRS 17 in concert with IFRS 9, the expert input also focuses on how this joint implementation is likely to proceed, what the main challenges are and why it is ultimately a good decision to implement them together.

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November 06, 2017
How the second Payment Services Directive (PSD2) disrupts financial services – even beyond payments

This expert input addresses PSD 2 and the possibly underappreciated impact it could have on (and arguably beyond) financial services, opening many hitherto closed doors. It looks at the regulatory progress all the way from PSD 1 to PSD 2. It notes that the development of the Single Euro Payments Area – SEPA – would not have been possible without PSD 1, and an analogous paradigm shift may be expected with PSD 2. The article notes that PSD 2 may lead to the emergence of new and a separation of old services in the hands of innovative FinTech companies, though the established players still hold a very strong position to compete, if only they adjust to the new reality.

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September 10, 2017
Non-Cleared Derivatives: Approaches towards initial Margin Calculation

This Expert input addresses the EMIR-related requirement of keeping a variation and initial margin; more specifically, the initial Margin is the main focus of the article. It lists the advantages of using the scheduled-based approach but shows that the margin requirements using this methodology may be a bit too steep. It further examines the possibility of internal models and concludes that their development could be just too cumbersome for most. It proposes ISDA SIMM as having the advantage of simplicity together with lower (or at least more realistic) requirements. The article finishes with comparing ISDA SIMM with the sensitivity-based approach for FRTB.

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August 10, 2017
EBA report on Results from the second impact assessment of IFRS 9

This Expert input addresses the degree of preparedness of Banks for the implementation of IFRS 9 as of February 2017 based on an EBA report. In this report, the EBA has carried out a thorough examination of the different stages of the implementing process of IFRS 9, that various different institutions find themselves at, notably making a distinction between the challenges faced by bigger (generally better prepared) and smaller (generally less prepared) institutions. The input finishes with some interesting quantitative observations and a list of EBA worries as well as a list of IFRS 9 challenges that the institutions will need to address once the scramble to formally adopt the standards is complete.

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June 20, 2017
TOWARDS EMIR II? New EMIR reporting standards & the EMIR review

This article discusses the review of the European Market Infrastructure Regulation, conducted in May 2017. It lists a brief overview of the regulatory framework to date, including RTSs (on complex trades, cleared trades, Collateral Exchange, notional amount, etc.), ITSs (on the use of LEIs, classification of collateralization, generation of UTIs, etc.) as well as updates to the official Q&A. Apart from this basic overview, the article delves deeper into the specific changes for reporting and reporting standards. It portrays four main fields that we have some reason to believe that the review is going to be concerned with, together with predictions of how these challenges will be addressed.

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June 13, 2017
AnaCredit

This Expert input focuses on the analytical credit database project of the ECB (AnaCredit). It explains this new database – which is intended to consist of a dataset with granular information on individual loans, how this dataset is aggregated in the Eurozone (and potentially beyond), what the initial limitations are and what plans the ECB may have to overcome them in the future. It shows the reporting process and timeline in which the database will be introduced. Most importantly, it describes three building blocks that any institution needs to adopt in order to make sure that they are successfully compliant.

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June 01, 2017
BCBS 239 A Long Road to Compliance

This Expert input conducts a thorough examination of the Principles for Effective Risk Data Aggregation and Risk Reporting that were primarily intended for Global Systemically Important Institutions but are of great interest to all. It explains the intuition behind BCBS 239 and why it is important for other institutions than G-SIB’s. It provides a broad overview of all 14 principles, and their meaning for institutions as well as supervisors. It looks at the greatest challenges in the implementation of BCBS 239 (traditionally data quality, but technical issues too) and offers four key suggestions for successful compliance.

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February 10, 2017
Big Data in the Financial Industry

This expert input follows the release of a discussion paper on the use of big data by financial institutions published by the Joint Committee of the European Supervisory Authorities. It examines the general data-related regulatory framework that financial institutions are facing or will face in the future, all the way from very general requirements (GDPR) to requirements specific to financial services (EMIR & MiFID II). The paper also discusses the potential uses of big data by financial institutions and how it would influence the operations of those institutions, their potential costs and benefits. The expert input concludes with our evaluation of the possibilities arising from big data as well as our projection of the regulatory future regarding this topic.

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