Compliance is key for 2019 – IFRS9 solution

• A centralised, flexible, high-performance analytics environment

Fitch Ratings rates 16 of the local banks and 12 of them have disclosed their day-one impact of the new accounting standard which significantly increases the banks’ loan loss provisions. 

International Financial Reporting Standards (IFRS 9) or its Sri Lankan equivalent of SLFRS 9 required banks to change their provisioning models from incurred credit loss method to the expected credit loss method. (http://www.dailymirror.lk/business-news/SL-banks-managed-IFRS-9-capital-impact--but-macro-stability-could-stymie-progress---Fitch/273-164439)

IFRS is short for International Financial Reporting Standards. IFRS is the international accounting framework within which to properly organise and report financial information. (https://www.accountingtools.com/articles/what-is-ifrs.html)

SAS Expected Credit Loss (ECL) provides a centralised, flexible, high-performance analytics environment so banks can estimate expected losses as required by the new IFRS 9 credit impairment accounting standards. Financial institutions can create an efficient and sustainable process to meet the challenges of the new requirements, and improve their stress testing, risk management and financial reporting capabilities.

It helps banks meet the computational challenges and tight timelines of the new standards, while reducing implementation and execution risks. Banks will be able to create, test and manage large numbers of complex forecasting and analytical models, ensuring process transparency and auditability along with instilling strong model governance.

SAS Expected Credit Loss (ECL) is a web-based solution that can be used to calculate and account for expected credit losses (also called impairments) and perform loss reserving.

Four modules of the ECL solution

1.Model Implementation Platform (MIP): Provides a controlled environment where systems of complex risk models can be implemented very quickly to meet IFRS 9 requirements

2.Risk and Finance Workbench (RFW): Makes orchestrating the IFRS 9 process for executing and consolidating results across impairment categories more streamlined and provides a workflow around execution for results review / challenge, and sign off

3.Business Rules Manager (BRM) : Business front end GUI for users to manage from simple to complex rules sets in either determining loan treatment, stage classification or help prepare rule based GL postings

4.Visual Analytics (VA): A web-based interface that provides data exploration capabilities useful in the model building process. In addition to its analytics capabilities (correlation, predictive analysis and forecasting amongst others), Visual Analytics provides an information delivery capability that enables self-service reporting.

IFRS 9 solution benefits

The proposed solution will provide performance enhancements, auditability and traceability capabilities to comply with the IFRS 9 standard. 

 

• The main key points are,
• Time to develop
• Time to deliver
• Governance, transparency and automation:
• Scenario Analysis

SAS leverages its in-memory Massively Parallel Processing (MPP) technology to improve performance significantly and handle complexity in modelling, scenario management and execution. 

The SAS solution offers a complete environment for delivering IFRS 9 including:

 

• The calculation of effective interest rate and amortised cost based
• Fair value (NPV) calculation
• Impairment (provision) calculation based on book and fair values (DCF) or custom formulas
• Calculation of unwinding of interests
• Generation of booking entries
• Generation of standard, as well as customised reports
• A structured data store where detailed results (Results Repository) from both SAS and third party models can be loaded
• In memory reporting and visualisation capabilities
  
   

Model Implementation Platform (MIP)

SAS Model Implementation Platform provides a controlled environment where complex systems of loan level risk models can be implemented very quickly and transparently. SAS Model Implementation Platform helps financial institutions meet the computational challenges, tight timelines, and regulatory scrutiny of both portfolio stress testing exercises and new expected credit loss allowance standards (IFRS 9 and CECL). MIP provides ready-made templates for multi-horizon forecasts based on many approaches including but not limited to proportional hazard, markov chain, and state transition.

SAS Model Implementation Platform (MIP) benefits financial institutions that need to efficiently execute complex analytics using a powerful risk engine. It’s built for model development and implementation teams responsible for activities like stress testing, credit loss reserving (for IFRS 9 and CECL), and loan valuation.

Benefits of SAS MIP

• Streamline the model estimation-to-implementation process.
• Improve auditability and controls with a searchable, centralised model library.
• Simplify setup and maintenance of complex modelling systems with greatly reduced coding requirements.
• Reduce model run times dramatically with massively parallel processing.
• Analyse and understand results quickly with high-speed drill-downs and on-the-fly aggregations.
• Perform A/B model comparisons and sensitivity tests easily using modular model components.

Benefits of the MIP module and its graphical user interface

• Reduced time and resources to set up and implement complex modelling systems, load and search models and model groups, view model parameters and UDL (Script language to orchestrate model sequence and interaction)
• Simplified preparation for execution by selecting model group, portfolio, economic scenarios and product mappings
• A controlled model execution environment and code generation by leveraging the integrated model library with its auditing functions that link results, models and data used
• Enhanced High Performance Risk capabilities for Monte Carlo loan-level model execution.
• Integrated Risk analysis reporting tool for results analysis and drill-down capabilities.
• Achievement of full transparency, auditability and repeatability.

SAS is a strategic ICT partner of JIT and a leader in analytics. Through innovative analytics, BI and data management software and services, SAS helps turn your data into better decisions.

JIT commenced operations in 1996 as a single entity in a 100sq ft. basement office – a journey which started over 22 years ago, has been one of success and learning. Since its humble beginnings, JIT has grown from a team of six members to a group of 290 employees with varied Information and Communications Technology (ICT) offerings ranging from systems integration to Geographical Information Systems (GIS).

Furthermore, JIT was the only local company recognised in the APAC CIO Outlook magazine’s Annual Top 25 Government and Public Sector Technology Providers for 2017. With over two decades of excellence, JIT provides cutting-edge integrated solutions to telecommunications, government, health, defence and financial sectors.