Case Study 2
IFRS 9 Governance & Assurance
Client Requirement
Following IFRS 9 implementation, a large UK universal bank’s forecasting and stress testing models were out of governance with several areas identified as non-compliant.
The client requested a secondary model validation as well as delivery of series of Model Overlays to cater for model inefficiencies.
These included inherently difficult to assess areas (e.g. assets past their maturity).
Our Role
We redesigned existing periodic validation bringing in additional controls and streamlining the process.
Model review led to an overall calibration and a re-development of one of the segment models.
Overall, we produced a suite of approx. 10 Model Overlays – we strongly recommended to include those as part of the model build.
Once complete, we supported Group Risk function to help liaise with the regulator.
Benefits Delivered
70% of the forecasting model suite re-gained their in-governance status with plans and recommendations to bring them into full governance.
Subsequent PRA Stress exercise resulted in a reduction of supervisory capital add-on partly due to improvements to the existing framework and meeting the regulator expectations.
Methodology produced for Model Overlays will be incorporated into future re-builds.