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Capital Planning and Management

Unforseen capital needs are costly to address, and regulators expect banks to plan to maintain enough capital to continue operations even under stressful conditions. Indeed, since the wake of the recent financial crisis, EU regulators demand more frequently EU-wide asset quality reviews and capital adequacy assurance tests while US regulators expect bank holding companies to submit formal capital plans on an annual basis. The UK Prudential Regulatory Authority is expected to follow the US model.

 

Examiners expect that an organization’s Internal Capital Adequacy Assessment Process (ICAAP) is an integral part of the strategic planning process and that business plans are supported by a robust capital planning and management framework. Our analyses and assessments encompass:

  • ICAAP design, implementation and report preparation
  • Identification of significant risks within an organisation
  • Assessment of the adequacy of existing risk mitigants
  • Calculation of additional Pillar 2 capital needs and allocation to risk categories and lines of business
  • Capital contingency modeling: assist Investment Firms and Banks modelling the implications of the strategic plan and potential deviations from the plan
  • Capital contingency planning: Identification of future capital needs
  • Identification of contingencies to future capital needs.
  • Assistance in preparing for the SREP (supervisory review evaluation process).

 

Other more basic work, preparatory to the ICAAP, includes the review, evaluation and implementation of Pillar 1 capital requirements under EU CRD4/EU CRR. Our services include:

  • Calculation of Eligible Own Funds
  • Calculation of Risk Weighted Assets
  • Calculation of capital adequacy ratio
  • Completion of COREP (Common Reporting) Templates and submission to CBC per calendar quarter
  • Calculation of Large Exposures, completion of regulatory templates and their filing to CBC per calendar quarter
  • Advisory on optimising capital adequacy and maintaining compliance with regulatory limits  (e.g. through provision re-allocation, eligible collateral pledging, process re-engineering, SME definition)
  • Advisory on better managing large exposures with respect to regulatory limits (e.g. through the use of financial collateral)

 

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