Dear SAP Banking Community,
As we all know, we’re sadly in the middle of a very painful recession, the Financial System has suffered an enormous stress and the situation is still serious.
Looking at the media we see very often that the Banks need to be recapitalized, without capital there’s no credit, and credit is the fuel of the economy.
Jean Claude Trichet, President of the European Central Bank said yesterday (January 14th 2010); “Banks should use the improved funding conditions to strengthen further their capital bases and where necessary take advantage of government measures.”
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=adKklreVp8JI
But Capital is an expensive resource…
Is there an IT answer to the requirement?
According to Basel II and IFRS regulation, we have some techniques for Risk Mitigation and Profit Generation; let me give you some simple examples.
Netting Assets and Liabilities Positions.- All the Banks and Financial Institutions have crossed investments; Bank A borrows money from Bank B and the other way around.
Basel II agreement and local regulations gives the possibility of Netting those Assets and Liabilities, or OTC-Derivative Positions, so reduce the exposures, consequently the Risk Weighted Assets and Finally the Regulatory
Capital.
So we get “Free Capital”.
IFRS recognizes the Risk Mitigation Opportunity of Hedge Accounting, and permits the Valuation Adjustments of Financial Instruments. Those Adjustments bring additional Profit and “Generate” Capital in the Balance Sheet.
The difficulty here is that we must fulfill some strict legal requirements for proving the legal Netting Agreements and the Effectiveness of our Hedge Relationships.
Proving that we fulfill those requirements requires a Structured Data Model and efficient Risk Calculators on our Information System, and very powerful Reporting Tools.
Once again; “Disclosure is the Word”.
Looking forward to read your views.
Kindest Regards.
Ferran.
As we all know, we’re sadly in the middle of a very painful recession, the Financial System has suffered an enormous stress and the situation is still serious.
Looking at the media we see very often that the Banks need to be recapitalized, without capital there’s no credit, and credit is the fuel of the economy.
Jean Claude Trichet, President of the European Central Bank said yesterday (January 14th 2010); “Banks should use the improved funding conditions to strengthen further their capital bases and where necessary take advantage of government measures.”
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=adKklreVp8JI
But Capital is an expensive resource…
Is there an IT answer to the requirement?
According to Basel II and IFRS regulation, we have some techniques for Risk Mitigation and Profit Generation; let me give you some simple examples.
Netting Assets and Liabilities Positions.- All the Banks and Financial Institutions have crossed investments; Bank A borrows money from Bank B and the other way around.
Basel II agreement and local regulations gives the possibility of Netting those Assets and Liabilities, or OTC-Derivative Positions, so reduce the exposures, consequently the Risk Weighted Assets and Finally the Regulatory
Capital.
So we get “Free Capital”.
IFRS recognizes the Risk Mitigation Opportunity of Hedge Accounting, and permits the Valuation Adjustments of Financial Instruments. Those Adjustments bring additional Profit and “Generate” Capital in the Balance Sheet.
The difficulty here is that we must fulfill some strict legal requirements for proving the legal Netting Agreements and the Effectiveness of our Hedge Relationships.
Proving that we fulfill those requirements requires a Structured Data Model and efficient Risk Calculators on our Information System, and very powerful Reporting Tools.
Once again; “Disclosure is the Word”.
Looking forward to read your views.
Kindest Regards.
Ferran.
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