Design, development, and integration of a customised RWA calculation engine

The company is one of the most important institutions in Germany and Europe, with branches all over the world. With the introduction of CRR III, it was faced with the challenge of transferring its existing reporting system for calculating counterparty credit risk to a completely new “in-house” solution.

Challenge

The institution faced the challenge of replacing its existing reporting system while simultaneously developing its own CRR III-compliant solution. Unlike many other institutions, the credit risk-related key figures are calculated by themselves and exported to the reporting software in the final stage. This contrasts with most German institutions, which do not calculate their (RWA) key figures themselves, but have them calculated by another party. As a result, the institution had to redesign the entire process from start to finish.

Specifically, this meant that the existing and outdated calculation engine structure first had to be removed from the data management system. The next challenge was to connect the new calculation engine to the existing data warehouse and ensure that all the necessary information was available there. Designing the calculation engine itself can be described as the biggest challenge. It required preparing all the data supplied and thinking through several calculation levels to arrive at the final RWA. These complex procedures were made even more difficult by the fact that all the new CRR III requirements had to be considered. Ultimately it meant that a deep understanding of the new regulations had to be developed.

Finally connecting the obtained results to the reporting software to ultimately ensure the institution’s reporting capability, including the technical accuracy of the results, was a major task. Our project team consisted largely of newcomers to reporting and people who were working with this client for the first time, which meant that not only did we have to build up the institution’s internal expertise, but also the necessary regulatory knowledge.

Solution

We were able to support our client with the following activities and expertise:

• Analysis of the existing bank architecture and rollback of the existing calculation engine
  The existing environment was analysed and solutions were developed to gradually replace the existing calculation engine and integrate it into the bank control system
• Connection of the calculation engine to the preceding data warehouse
  We analysed existing and necessary data and promoted the interaction with the relevant preceding systems
• Design of the different levels of the calculation engine
  Assessment- and calculation-logic had to be carried out across different levels for all relevant business types of the client, which is why we also provided support in data preparation, standardization, availability, and calculation
• Regulatory expertise
  Since all CRR III changes (risk weights, real estate values, etc.) had to be implemented immediately, we supported our client with detailed expertise
• Extensive test support
  We took over the testing activities for all business types across the entire processing chain
• Connection to the reporting software
  Information determined in the RWA calculation engine had to be connected to the external reporting software. We provided support in designing the results interfaces and testing all relevant COREP reporting templates.

Result

Our commitment has resulted in the new RWA calculation engine being a highly optimized solution that is fully integrated into the existing banking architecture. This means that future adjustments and innovations can also be implemented or added without the calculation engine having to be significantly rebuilt. Our client was able to submit a successful first report in accordance with CRR III.

The project was completed on time, within scope, and within budget, which was a remarkable success for all parties involved.

Our project was extremely challenging, as it required a wide range of skills and expertise. Working closely with our client, we were able to achieve a successful outcome and create a great product thanks to our excellent collaboration throughout the entire project. I am very proud of our team’s performance and the added value we were able to offer the client.
Marco Berardi, Manager, Advisense