Building an Integrated Data Layer consistent with ECB’s BIRD initiative

How Finalyse can help

Risk Data Management & Reporting Factory

Reporting for Institutional Investors in Funds

Delegating regulatory watch, risk calculation and report production towards Finalyse

European banks, pension funds, and insurance companies have to follow strict rules when investing in funds due to changes in supervisory laws. They need detailed reports from asset managers to meet these regulations.

There are two main options for reporting:

Treating funds as equity, which requires holding more capital.
Using a transparency approach, where each asset in a fund is treated individually, often leading to lower capital requirements.

To fulfill their regulatory needs, these institutions ask asset managers for comprehensive reports on their investment portfolios. These reports, called "Institutional Investors Reporting," need to be standardized and delivered promptly.

European financial institutions rely on detailed reporting from asset managers to comply with evolving supervisory laws regarding fund investments. Asset managers are often opting to outsource this task to external providers due to its complexity and to maintain focus on their core business activities.

They may not fully understand the relevant regulations.
Risk calculations are not their expertise.
Dealing with derivative instruments can be complex.
Producing these reports in-house can be time-consuming and burdensome for staff.

How does Finalyse address your challenges?

Regulatory watch:

In-depth knowledge of European and local regulationsto calculate capital requirements considering the full range of risk exposures held by institutions through investments in fund positions. Leverage on our regulatory watch department to benefit from calculation and report always compliant with the latest regulatory evolutions.

Risk Calculation and Report Automation:

Calculation layer with robust and specific calculator engines compliant with the European & local regulations. Fully automated and auditable calculation and reporting process ensuring timely distribution of your regulatory reports in the required layout/formats. The human workforce only focuses on high value-added tasks (methodological updates, validation and controls).

Managed Services:

Finalyse applies the "4-eye" principle. Each automated report is reviewed by a senior team member. This control ensures that the report is consistent, in data sources and methodology. Our support includes answering any specific question from institutional investors regarding their templates, answering questions from auditors or NCAs and first line investigations in case of rejection by supervisor.

How does it work in practice?

Asset manager data

Funds

Sub-funds

Collateral data

Data enrichment

Bond data

Equity data

Collateral data

Master data + Glossary

Derivatives data

Fund data

External market data

Classifications and Calculations

Solvability Ratio reporting / RWA calculation tool

SA-CCR calculation tool

Large exposure calculation tool

SCR calculation tool

CVA calculation tool

Insight on RWA Calculator

A dedicated calculation tool that computes Standardized Approach RWA on an entire portfolio for various configurations (CRR2, D424 (Basel IV), CRR3) with credit-risk mitigant allocation.

Tool description

For CIUs, the tool calculates risk weighted assets amounts at fund level using either the look- through approach or the mandate-based approach.

In the look through approach:

Data is mapped/enriched with regulatory parameters (Ratings, Asset Class etc).
Compute EAD for each underlying exposure, using the output of SA-CCR calculator for derivative exposures.
Each underlying exposure of the fund is assigned to a risk weight based on the characteristics of the exposure (credit quality of the issuers/issue, asset class etc).

In the mandate-based approach:

Data mapping/enrichment with regulatory parameters
Assign the risk weights in accordance with the limits set in the Fund’s mandate

Challenges

Performing a full look-through approach is required in order to avoid fallback to 1250% risk weight for target funds.
Collecting mandate/fund limits for the Mandate Based Approach
Multiple reporting formats exist to collect/report RWAs and Solvability Ratios, often with their own specifications.
Regulatory Compliance: Keeping up with changes in financial regulations to ensure ongoing compliance is a primary challenge.
Data Integrity and Integration: Ensuring accuracy and consistency across different data formats and sources can be complex.
Classification of complex assets: The classification of complex assets and interpretation of the relevant shock to be applied
Scalability: The tool must efficiently handle increasing amounts of data and users without performance degradation.

Insight on SA-CCR Calculator

A dedicated calculation tool measuring the exposure at default (EAD) on derivatives according to the latest regulatory requirements under the Standardised Approach to Counterparty Credit Risk (SA- CCR) as per Title II Chapter 6 of the CRR.

Tool description

Based on trade-level and netting set-level data, the Calculator can automatically perform the following:
For each of the regulatory-prescribed asset classes:
The mapping of the supervisory parameters.
The regulatory-prescribed calculations at each level of aggregation, starting with the trade level and the hedging set level.
The final regulatory-prescribed calculations to determine the EAD amount per netting set / margin agreement;
The Calculator can process:
A one-to-one relationship between the margin agreement and netting set, as well as a one-to-many (i.e., one margin agreement covering multiple netting sets);
Derivatives with linear payoffs (e.g., forwards, futures, swaps), non-linear payoffs (e.g., call and put options, as well as CDS tranches), and IR basis swaps

Challenges

RC is calculated at netting set level but PFE add-ons are more calculation intensive and should be calculated for each asset class and then aggregated to the total PFE-add on at netting set level
Complex collateral data need to be processed on top of funds holdings (margin agreements, collateral agreements, initial/ variation margins,...)
Add-on calculations differs depending of the asset classes (complex derivatives can also belong to more than one asset class

Insight on Large Exposure Calculator

A dedicated calculation tool allowing institutions to determine if their investment can be considered granular. If not, It seamlessly combines and allocate SACCR EADs together with necessary reporting disclosure requirements.

Tool description

The tool is calculating at fund level that aggregated underlying exposures (at the entity and group levels) do not exceed a certain threshold so that the investment can be considered granular enough.
When the funds is considered granular if can be exempted from large exposures calculation.
The tool is then combining all exposures above the threshold with all connected counterparties (counterparties sharing the same highest mothers) to calculate the related capital requirements.
The exposure calculation is using the output of SA-CCR calculator for derivative exposures.
Results can then be mapped within the Großkredit und Millionenkreditverordnung (GroMiKV) report disclosing investment funds’ large exposures.

Challenges

Collect and process counterparty data to determine investments related to the same highest mother in a consistent way.
Regulatory Compliance: Keeping up with changes in financial regulations to ensure ongoing compliance is a primary challenge.
Data Integrity and Integration: Ensuring accuracy and consistency across different data formats and sources can be complex.
Classification of complex assets: The classification of complex assets and interpretation of the relevant shock to be applied
Accuracy and Precision: The tool must perform complex financial calculations flawlessly to avoid significant consequences..
Scalability: The tool must efficiently handle increasing amounts of data and users without performance degradation

Insight on SCR Calculator

A dedicated calculation tool computing the solvency capital requirements for (re) insurance companies according to the latest regulatory requirements under the Solvency II EU Commission Delegated Regulation 2015/35

This tool is versatile and can be tailored to conduct capital requirement computations for various frameworks, including VEV, FTK, ICS, and BMA, among others.

Tool description

Finalyse has developed a versatile Python-based tool for calculating the Solvency Capital Requirement (SCR) in compliance with Solvency II.
The tool encompasses the Market Risk module, detailing sub-modules such as Equity, Interest Rate, Property, and Currency.
Designed for flexibility, it allows customization to cater to different data formats and reporting requirements.
It methodically computes expected cashflows for a spectrum of assets, including fixed income and derivatives.
Regulatory shocks are systematically applied across asset classes to ascertain the precise SCR for each sub-module.
The output is customisable, aligning with the specific reporting requirements of users.
Capable of adaptation, the tool can also be easily customised for different regulatory regimes such as VEV and FTK in the Netherlands, for the calculation of capital requirements.

Challenges

Regulatory Compliance: Keeping up with changes in financial regulations to ensure ongoing compliance is a primary challenge.
Data Integrity and Integration: Ensuring accuracy and consistency across different data formats and sources can be complex.
Classification of complex assets: The classification of complex assets and interpretation of the relevant shock to be applied
Accuracy and Precision: The tool must perform complex financial calculations flawlessly to avoid significant consequences. However, the use of Python will mitigate this risk.
Scalability: The tool must efficiently handle increasing amounts of data and users without performance degradation. However, the use of Python will mitigate this risk.

Insight on CVA Capital Charge calculator

A dedicated calculation tool measuring the capital charge for Credit Valuation Adjustment (CVA) risk on derivatives and secured financing transactions according to the Standardized Method as per the Capital Requirement Regulation (CRR).

Tool description

The tool measures the risk of losses arising from changing CVA values in response to changes in counterparty credit spreads and market risk factors that drive prices of derivative transactions and secured financing transactions.
As an input, the tool will use netting-set level exposure at default (EAD or ECD in French) as calculated in the SA-CCR calculator. Capital requirements will then be calculated by applying the regulatory formulas and aggregating across netting sets.

Challenges

Regulatory Compliance: Keeping up with changes in financial regulations to ensure ongoing compliance is a primary challenge.
Data Integrity and Integration: Ensuring accuracy and consistency across different data formats and sources can be complex.
Classification of complex assets: The classification of complex assets and interpretation of the relevant shock to be applied
Accuracy and Precision: The tool must perform complex financial calculations flawlessly to avoid significant consequences.
Scalability: The tool must efficiently handle increasing amounts of data and users without performance degradation.
Complex collateral data need to be processed on top of funds holdings (margin agreements, collateral agreements, initial/ variation margins,...).

Report generation in client specific reporting templates

CRR Solva KSA

Basel I/II/III Report

LCR Report

GroMiKV

TPT Report

PKG Reporting

ECD-CVA

ETC...

Key Features

Funds & sub-funds’ portfolios enrichment with market data.
Implementation of data quality checks and controls.
Performing classifications and calculations according to reporting requirements.
Generation of the reports in the layouts and formats required.
Delivery of the reports by SFTP or e-mails.

Download the brochure

Our subject matter experts

THOMAS GILLET

Partner - Risk Advisory Banking, Data Management Framework Implementation Expert

Through his consultancy career, Thomas has developed a sharp expertise in financial products, data quality, processes and (regulatory) reporting. He has gained thorough experience in data modelling techniques and reporting tools when building Data Warehouse / Datamart projects & Reporting Framework for the Market Risk & ALM departments of several banking institutions. He developed a strong experience in BCBS 239 implementation projects, tackling data quality issues and putting in place data governance framework.

Marc-Louis Schmitz

Partner

Marc-Louis Schmitz, Partner at Finalyse and member of the executive committee, is the founder of the independent valuation services business line.
He oversees operations, team management, and strategic development.
Known for fostering an inclusive, growth-oriented work environment, he supports a skilled team dedicated to mastering complex valuation processes, models, and best practices.
With a strong background in valuation, risk modeling, and regulatory compliance, Marc-Louis has expanded Finalyse's managed services to meet evolving regulatory and client needs.

Abishek Chopra

Principal Consultant - Credit Risk, CRR3 & BASEL IV Expert

Abishek Chopra is a seasoned Risk Management professional with over 12 years of experience in multiple areas of credit risk, especially on CRR and Basel guidelines. He has expertise in addressing complex regulatory topics such as credit risk mitigation for RWA optimization of different asset classes, Basel IV application of Whole Loan/Split Loan approaches for mortgages, SA-CCR and Securitization.

Frans Kuys

Principal Consultant - Fellow of the Institute of Actuaries in UK - Expert in BMA EBS regulation / Solvency II / IFRS 17 / ICS / IORP II / Climate Change Risk Management for Insurers / Market Risk / Strategic Asset Allocation / AXIS

Frans is an actuary and Financial Risk Manager with international experience in the pensions and insurance sectors. He has been specialising in actuarial valuations (AXIS), financial and regulatory reporting (IAS19, US GAAP, IFRS2, IFRS17), regulatory reporting (IORP II, Solvency II, ICS, BMA), market risk management (ALM, SAA), climate change risk management and investment consulting.

HUGO WEITZ

Principal Consultant - Data Management Framework Implementation Expert

Hugo is a Principal Consultant in Finalyse Brussels. He has a wide knowledge and expertise in financial products, valuation algorithms, reporting and regulatory issues. He combines in depth knowledge of banking financial risks and regulations with a wide understanding of the data, IT infrastructure and processes underneath. Hugo has been involved in multiple Risk and Regulatory Reporting implementation projects such as RWA calculation for credit risk, EAD calculation under SACCR, automation of internal reports for ALM and implementation of data governance to comply with BCBS239. Hugo is an experienced Agile project manager who stands-out for his dynamism, adaptability and interpersonal skills.