Solution Brief
Regulatory capital management
Banks face the challenge of updating risk-weighted asset calculations and adjusting business models.
The issue
Banking regulatory capital management is increasingly complex due to constantly evolving global and domestic regulations such as Basel III, which require banks to maintain sufficient capital for stability. These regulations, including the Basel III Endgame proposal by the Fed, FDIC, and OCC, challenge banks to keep pace with new rules, particularly as the proposal introduces significant changes to the US capital framework. Disagreements among regulators and industry stakeholders, especially over increased capital requirements, add to the complexity, often causing delays and negotiations. While higher capital requirements aim to enhance resilience, they can also restrict lending and investment, potentially impacting economic growth.
With a proposed compliance date of July 1, 2025, and a three-year phase-in, banks face the challenge of updating risk-weighted asset calculations and adjusting business models. In this regulatory climate, banks must modernize their capital management strategies, focusing on technology, agility and efficiency to successfully implement these changes.
The challenge
Adapting to growing demands from regulators
Banks are being exposed to unprecedented regulatory scrutiny with new and stricter regulatory requirements. The highly flexible nature of the SAS solution allows you to easily remain up to date and compliant with the latest regulatory changes.
Insufficient flexibility and speed
The current banking system landscape is fragmented, costly, unstable and not agile enough to deliver under time pressure. The SAS solution’s high-performance calculation engine speeds up execution cycles by accelerating run times, allowing you to achieve faster results.
Lack of auditability
Many banks lack the right tools to enable effective governance, control and transparency. With the SAS solution, you’ll satisfy regulatory obligations and ensure full compliance and traceability of calculations while accommodating varying interpretations of the applicable regulatory frameworks across multiple jurisdictions.
(Easily adapt to changing regulatory requirements and accommodate varying interpretations of the applicable regulatory frameworks across multiple jurisdictions;Flexible solution allows for easy system evolution, so banks can stay up to date with the latest regulatory changes;Built on top of the SAS Risk Stratum, which enables non-regulatory risk analytics to be accessed in the same framework as regulatory calculations)
Our approach
Banks need to proactively manage regulatory capital using a single management environment covering Basel III Capital Accord and Capital Requirements Regulations (CRR) for all credit risk calculation approaches.
SAS approaches this problem by providing software and services that help you:
Satisfy regulatory obligations
Ensure full compliance and traceability of calculations.
Get faster results by reducing runtimes
Our high-performance calculation engine accelerates execution cycles.
Shape the solution to fit your specific needs
Leverage our calculation engine while ensuring low maintenance costs.
Achieve other credit risk objectives
Leverage existing assets and applications as you migrate toward an integrated centralized risk environment.
Capitalize on the flexibility of the underlying SAS® Risk Stratum platform
Use it to grow and anticipate future risk reporting requirements and regulatory changes.
Process large data sets in near-real time
Harness distributed, in-memory processing to create and run models. Once results are available, perform on-the-fly aggregations and drilldowns.
Adapt to change
Add on new functionality as needs and regulations change.
We had to develop a Portfolio Carbon Footprint Calculation, and our best choice was to implement it into our SAS risk weighted assets (RWA) calculation platform. This gives us many benefits of data consistency, auditability, and regulatory compliance. The required data input and calculation complexity is very similar to the RWA calculations, and the SAS solution provides us a robust and high-performance risk calculation and simulation platform.Gabriel Marosi ESG Advisor to the Board, Erste Group
SAS difference
SAS offers pre-configured calculations for regulatory credit risk measurement and management as well as data integration, data quality tools and simulation capabilities. You can store bank-wide portfolio and counterparty data for all historical time points, show calculation lineage, support multiple use cases and leverage capabilities allowing:
Comprehensive data management
- The interactive, point-and-click SAS Data Integration environment and integrated metadata reduce the need for custom coding, testing and maintenance.
Support for regulatory calculations
- This includes Basel and the European regulatory frameworks and all regulatory credit risk approaches, including securitizations and counterparty credit risk.
Parallel processing with the SAS Infrastructure for Risk Management execution platform
- It enables complete audit and system transparency. Its robust data model stores analysis output and supports full auditing and historization.
Exploration and visualization with SAS Visual Analytics
- Calculate results based on granular outputs across different management dimensions.
Everything runs on the SAS Risk Stratum platform in an open, configurable, auditable and highly adaptable manner.