Dear,
As we have commented in previous blogs, the Financial System is at the middle of a Systemic Transformation, from a model based in Volume to a model based in Capital Optimization.
The transformation is forced by the regulators, by increasing Capital Levels (Basel III, Basel IV. TLAC), implementing new Accounting Principles (From Nominal Accounting and Incurred Losses to IFRS Accounting and Expected Losses) or increasing Reporting Requirements with BCBS 235.
Last week, the European Central Bank released a new draft on Provisioning Requirements for Non Performing Loans.
You can find the details here.
In a nutshell, the new requirements increase pressure on European Banks to reduce Non Performing Loans in their balance sheets.
Currently, European banks hold one trillion Euros of Non Performing Loans. On average, the coverage of this type of assets is 45%; with this new regulation, Non Performing Loans with collateral must be 100% provisioned in seven years, and Non Performing Loans without collateral must be fully covered in two years.
On the other hand, ECB which has been reducing Bank’s cost of capital by acquiring Bank’s bonds during each of the quantitative-easing cycles, it’s close to reduce significantly the size of this purchases.
As Capital becomes more scarce and expensive, the priority becomes Capital Optimization, this is the foundation of the Financial System which is emerging from this Systemic Crisis.
SAP provides the Best of Breed Capital Optimizer with SAP Bank Analyzer; with SAP Bank Analyzer, banks executives get an answer to the three most critical questions of strategic management in the new paradigm.
- How much Profit is the bank’s making in each business segment?
- How much Capital is the bank’s consuming in each business segment?
- How much Liquidity is the bank’s consuming (or generating) in each business segment?
Recently, a group of experienced SAP Banking consultants have decided to join our efforts in an initiative, for providing SAP Banking transformation programs, with focus in Capital Optimization; the result is Capitency.
In Capitency, we believe that SAP technology is critical for providing bank’s with Capital Optimization Information Systems, helping them with the challenges of the Systemic Transformation.
We are looking forward to accompany you during this journey.
Join the SAP Banking Group at: https://www.linkedin.com/
Visit my SAP Banking Blog at: http://sapbank.blogspot.
Let's connect on Twitter: @FerranFrancesGi
Kind Regards,
Ferran Frances.
