Connect with us

Top Stories

Spreadsheet Risk Management Key to TRIM Compliance




By Henry Umney, CEO, ClusterSeven

The European Central Bank’s (ECB) Targeted Review of Internal Models (TRIM) is due to come into effect in 2019. TRIM is part of the ongoing programme of regulatory enhancements and forms part of the European Banking Authority’s (EBA) activities to enhance its visibility of the European financial services sector, and address key areas of systemic risk.

TRIM specifically targets those institutions that make use of Internal Models, rather than the Standardised Model, for calculating their risk weighted assets, and their regulatory capital under Basel III.

Henry Umney

Henry Umney

At banks, the vast majority of the effort to calculate their risk-weighted assets using Internal Models is via the use of powerful calculation engines, through corporate IT applications that leverage relational databases to compute the results for credit, market and counterparty risk. These applications are integrated into banks’ core IT applications covering credit cards, current accounts, mortgages and so forth.

However, some banks will have highly innovative, potentially bespoke business processes that underpin a range of ‘non-vanilla’ products and services that may feature a blend of multiple instruments, cash flows, asset classes and currencies.

Challenges of using spreadsheets for Internal Models

These offerings – typically unique and tailor-made – are likely to utilise Excel spreadsheets to design, structure, price, deliver and underwrite them. Even if the Internal Models themselves are IT supported applications, data feeding into and reporting from the Internal Models are likely to require spreadsheet supported processes.  The overriding reasons for using spreadsheets – as opposed to other corporate IT applications – for these offerings is the enormous flexibility and power Excel offers financial institutions for data collection, manipulation and calculation.

However, the spreadsheets that typically underpin these highly complex offerings present significant challenges for institutions who need to consider the demands of TRIM.

Foremost, is the lack of controls inherent in spreadsheets. The TRIM requirements for data governance and auditability around issues such as data quality management and data lineage, for example, must be mirrored in the management of the spreadsheets that underpin the products and services that utilise spreadsheets, rather than corporate applications.

This lack of transparency around the spreadsheet processes could potentially result in regulators forcing banks back onto the more capital intensive Standardised Model. Furthermore, from an operational perspective, without a capability that allows banks to assess the data governance and accuracy of spreadsheet-based data imported into their regulatory capital management frameworks, these financial institutions cannot assure the quality of results calculated under Internal Models. This can cause banks to miscalculate and/or miss-state their regulatory capital requirements, potentially requiring them to restate earnings and exposing them to regulatory censure and reputational harm. 

Automation is the panacea

To ensure that the data from this spreadsheet estate does not compromise the governance, auditability, and accuracy of the results of Internal Models, it is essential that the same level of control is applied to the spreadsheet environment as is applied to the wider corporate IT environment.

To this end, banks must adopt a best practice approach:

  • Identify the spreadsheets that impact the Internal Models framework the most.

This will enable banks to not only locate the TRIM-relevant spreadsheets, but also understand the complexity of how they are all linked together. It’s important to note here that this identification process must identify the providence of data flowing into and out of the models ensuring a full data lineage mapping.

  • Build a centralised inventory of these key spreadsheets

This will help bring the spreadsheets under management as well as enable banks to classify them based on the risks they might potentially pose to TRIM compliance and indeed other regulatory frameworks too. Ensure that there is an attestation process – it will not only support auditability, it will also make the process of managing spreadsheet risk under TRIM much more business-as-usual.

  • Monitor the most important spreadsheets for changes

This will help ensure accuracy of the results of the Internal Models, as well as provide the governance, transparency and auditability that are all core to the TRIM requirements.It also enables the key processes for issues like version control, change approval, and visibility of the addition of new data, which will be of interest to auditors, regulators, as well as management.

The sheer scale of many banking  spreadsheet environments, and the intricate complexity of data lineage that is often a feature, , automating these steps presents banks with the best chance of success and make delivering TRIM business as usual. Manually adopting best practice, despite the best will in the world, will be extremely challenging, given the immense complexity of the Internal Models and their associated feeds and reports. A simple error or omission in even a single cell or formula in the spreadsheet could skew the output of an Internal Model. The implication of such errors can be wide reaching, and not a chance worth taking.

About the author

Henry Umney is CEO of ClusterSeven. He joined the company in 2006 and for over 10 years was responsible for the commercial operations of ClusterSeven, overseeing globally all Sales and Client activity as well as Partner engagements. In July 2017, he was appointed CEO and is strongly positioned to take the business forward. He brings over 20 years’ experience and expertise from the financial service and technology sectors. Prior to ClusterSeven, he held the position of Sales Director in Microgen, London and various sales management positions in AFA Systems and DART, both in the UK and Asia.

Top Stories

Duo glide around world’s largest fountain in Dubai



Duo glide around world's largest fountain in Dubai 1

Paragliders Llorens and Goberna take magical flight above the Palm Fountain.

Horacio Llorens and Rafael Goberna defied gravity to perform The Breaking Pointe flight around the world’s biggest fountain at The Pointe, Palm Jumeirah in Dubai. Here is all you need to know:

– Spaniard Llorens is a five-time world champion and Infinity Tumbling Guinness World Record holder, who has performed a series of spectacular projects during the last five years including paragliding with a flock of starlings and with the beautiful Aurora Borealis as a backdrop.

– Brazilian Goberna was a Guinness Book of World Records winner at only 12-years-old and, in December 2016, he took to the skies above one of the seven wonders of the natural world when paragliding at Iguazu Falls.

– This time around, the duo teamed up in Dubai to showcase The Palm Fountain at the Pointe, Palm Jumeirah. They overcame a tricky preparation period to expertly glide between the fountain’s powerful jets of water.

– Spanning across the boulevard, the Palm Fountain features two giant floating platforms covering 14,000 square metres of sea water. Reaching an impressive 105 metres high and lighting up the Dubai sky with 3,000 LED lights, the fountain “dances” to hit songs from sunset until midnight.

– They undertook training first at Paramotor Desert Adventure on January 12 to test out their brakes and motors with technician Ramon Lopez finally arriving after being held up by the heavy snow in Madrid.

– Training was crucial for the challenge of flying during the night with low visibility as safety director Alan Gayton ensured they had a reserve parachute in case of a technical issue with the main parachute. Llorens and Goberna also had to study the movement of the water with great precision in order not to get caught up in the jets of water

– Flying over water, it was also mandatory to have a lifejacket with rescue boats, jet skis and divers on hand which came handy when Goberna suffered a technical malfunction on the first January 14 practice run.

– After repairs long into the night, they returned to Paramotor Desert Adventure to test out the motors again before completing the stunning flight on January 15 with Llorens and Goberna performing in harmony.

– Llorens, 38, revealed: “As soon as we got the opportunity, we wanted to fly there. We needed to know the area really well beforehand and we needed to know how to ‘play’ with the fountain – this was new for us. Such strong streams of water shooting 100 metres up is a lot, so we had to be really prepared.”

– Goberna, 26, explained: “The motor wasn’t flying so good because, prior to arriving in Dubai, it was last used in Europe at high altitude. I needed to adjust the carburettor in the air inside the motor. In the first practice flight over the water, I broke one propeller. I really couldn’t understand what was happening and then another one broke. Eventually, a backup motor was required. After a long journey, the final result was beautiful! The team worked incredibly hard to make it.”

– Llorens added: “The highlight for me was playing between the super shooters with Rafael, because it’s something we’ve never done before; it felt really new and really powerful.”

Continue Reading

Top Stories

EU sets itself jobs, training and equality targets for 2030



EU sets itself jobs, training and equality targets for 2030 2

By Jan Strupczewski

BRUSSELS (Reuters) – The European Commission on Thursday announced goals for the 27-nation bloc to reduce poverty, inequality and boost training and jobs by 2030 as part of a post-pandemic economic overhaul financed by jointly borrowed funds.

The EU executive arm said the European Union should boost employment to 78% in 2030 from 73% in 2019, halve the gap between the number of employed women and men and cut the number of young people neither working nor studying to 9% from 12.6%

“With unemployment and inequalities expected to increase as a fallout of the pandemic, focusing our policy efforts on quality job creation, up- and reskilling and reducing poverty and exclusion is therefore essential to channel our resources where they are most needed,” the commission said.

The goals, which will have to be endorsed by EU leaders, also include an increase in the number of adults getting training every year to adapt to the EU’s transition to a greener and more digitalised economy to 60% from 40% now.

Finally, over the next 10 years, the EU should reduce the number of people at risk of poverty or social exclusion by 15 million from 91 million in 2019.

“These three 2030 headline targets are deemed ambitious and realistic at the same time,” the commission said.

The goals are part of the EU’s set of 20 social rights, agreed on in 2017, to make the EU more appealing to voters and counter eurosceptic sentiment across the bloc.

They say everybody has the right to quality education throughout their lives and that men and women must have equal opportunities in all areas and be paid the same for work of equal value.

The unemployed have the right to “personalised, continuous and consistent support”, while workers have the right “to fair wages that provide for a decent standard of living”.

(Reporting by Jan Strupczewski; Editing by Nick Macfie)

Continue Reading

Top Stories

UK aero-engineer Meggitt eyes return to growth after pandemic slump



UK aero-engineer Meggitt eyes return to growth after pandemic slump 3

LONDON (Reuters) – British engineer Meggitt said that it could return to profit growth in 2021 provided there are no further lockdowns, despite a weakening in the struggling aviation market at the end of 2020 and early this year.

Pandemic restrictions halted much flying globally last year and forced plane makers Boeing and Airbus to cut production rates, dragging down suppliers like Meggitt, which makes and services parts for such aircraft.

Meggitt’s underlying operating profit plunged by 53% to 191 million pounds ($267 million) in 2020, it said on Thursday, despite continued growth in its defence business which makes parts for military jets and accounts for about 45% of the business.

Meggitt, however, said it expected air traffic to recover in the second half of the year which would help it return to profit growth over the year, although its guidance for flat revenue disappointed analysts who had expected growth of 6%.

Meggitt’s Chief Executive Tony Wood said in November that he had expected flying to start to recover by Easter, but new variants have led to more restrictions and delayed the recovery.

“It has gone back a couple of months… it’s now very much in the summer,” Wood said of the recovery in an interview on Thursday.

Further in the future, Meggitt is positioning itself for the move to lower emissions flying, and its sensors and electric motors will be used on electric urban air mobility platforms, such as flying taxis, and in hybrid aeroplanes being developed.

But Meggitt said new tax breaks announced in Britain’s annual budget on Wednesday aimed at encouraging investment would not change its plans.

“Yes, it will be a benefit. Are we looking at any acceleration as a result specifically of that? Not really,” Woods said.

Shares in Meggitt were down 1% to 427 pence at 0943 GMT. The stock has risen by 50% since news of a COVID-19 vaccine last November, but is still down 23% on where it was pre-pandemic.

($1 = 0.7165 pounds)

(Reporting by Sarah Young; Editing by Alistair Smout and Susan Fenton)

Continue Reading
Editorial & Advertiser disclosureOur website provides you with information, news, press releases, Opinion and advertorials on various financial products and services. This is not to be considered as financial advice and should be considered only for information purposes. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third party websites, affiliate sales networks, and may link to our advertising partners websites. Though we are tied up with various advertising and affiliate networks, this does not affect our analysis or opinion. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you, or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish sponsored articles or links, you may consider all articles or links hosted on our site as a partner endorsed link.

Call For Entries

Global Banking and Finance Review Awards Nominations 2021
2021 Awards now open. Click Here to Nominate

Latest Articles

Newsletters with Secrets & Analysis. Subscribe Now