How Capco supported an investment bank with the end-to-end implementation of the FRTB

INTRODUCTION

The client, a global tier one investment bank, was looking for a strategy and implementation partner for both their standard approach (SA) and internal models approach (IMA) efforts. The book of work for SA included managing the creation, validation, and automation of sensitivity models; directing the migration from legacy risk models to strategic solutions for multiple fixed income products (including structured products); and creating a product taxonomy for documentation of model compliance and ongoing regulatory reporting. IMA-related efforts included longer term strategic priorities such as creating the taxonomy, processes, and procedures for the systematic storage of market data and supporting front office technology in the creation of a strategic risk platform for full portfolio revaluation. 

WHY NOW? 


The client was approaching the implementation of the Fundamental Review of the Trading Book (FRTB) by prioritizing an enhanced risk management platform using a strategic capital usage assessment. Their platforms were challenged with siloed, product-oriented front office architecture requiring alignment for relevant data including strengthening historical data repositories and aligning to risk factor usage. Capco was able to support the client with managing changes to the regulatory framework as the industry responded and adapted to the proposed guidelines.

HOW WE DID IT: 

As the program ramped up into a multi-year strategic roadmap for change, Capco lead the efforts to implement compliance for mandatory FRTB standard approach enhancements as well as enhancements to their internal models within the regulatory deadlines by: 

  • Deploying a cross-functional team: An integrated team of experts across capital markets, risk, change management, program delivery and technology architecture to support the client with a holistic program delivery 
  • Adapting to changing needs: Focused skillsets adjusted during the lifetime of the program to ensure highest results with analysis, requirement gathering, modelling insights, solution definition and future vision 
  • Facilitating strategic decision making: To enable ongoing prioritization with the client program, including direction and support for breaking down complex challenges into topics which could be easily communicated, assessed, and managed
  • Utilizing industry insight: Expertise in market and credit risk with modeling capabilities, insights into the industry with accreditations and risk factor analysis to support the data quality and platform solutions
  • Ensuring delivery excellence: Definition and management of a multi-year roadmap with many integrated deliverables, including inflight projects across data and technology platforms, planned changes and resource constraints to deliver change within the external regulatory deadlines.

WHAT WE DELIVERED: 

Capco led the program and implemented compliance for mandatory FRTB standard approach enhancements within regulatory deadlines.  As part of the deliverables, internal models were migrated onto a strategic risk technology platform with business enhancements and the program implemented a cross-product data strategy and architectural solution for strengthening market data.

Capco capabilities and accelerators used to add value to the program included:

  • Capco’s Finance Risk & Compliance offering guided the approach for strategic regulatory change including methodologies for reviewing rules, establishing traceability, and preparing for audit documentation.
  • Capco Capital Markets domain provided senior capital markets expertise with industry insights through market and credit risk accreditations.
  • Capco’s Project Management Office toolkit was utilized to prepare roadmaps, budgeting and forecasting, milestone definition and status tracking for senior management visibility into the program.
  • Capco’s Target Operating Model methodology as well as business process optimization, accelerators were adapted to support the risk business operating model assessment.
  • Capco’s Technology Architecture and Innovation capabilities provided insights into developing their future risk management platform and data solutions.  

For more information on how Capco can support your business' regulatory and compliance needs, please reach out to: Bryce VanDiver.