Other parts of this series:
- Internal Model Method (IMM) Helps Banks Measure Capital Requirements
- Defining Materiality is Key First Step in Internal Model Method (IMM) Process
- Setting Progress Metrics for Internal Model Method (IMM)
- A Robust Control Framework for Internal Model Method (IMM) Implementation
- Internal Model Method Solution Design: Seeking Efficiencies in Regulatory and Business Initiatives
- Self-Assessment Considerations in Internal Model Method Compliance Programs
- A Coherent Target Operating Model for Internal Model Method Compliance Programs
- Establishing an Effective Regulatory Communications Strategy for Internal Model Method Compliance Programs
With capital requirements and capital reserves increasing due to growing regulatory demands, many financial institutions are considering a move to the Internal Model Method (IMM). In Accenture’s experience, we have seen that IMM provides a more risk-sensitive way of measuring banks’ capital requirements for various counterparty credit risk (CCR) scenarios, thus helping banks leverage institution-specific scenarios and data that is customized to each bank’s trading activity.
Given the complexity of IMM, we believe that banks choosing this approach should obtain regulatory approval first. Obtaining such approval requires banks to put in place a rigorous change, governance and management program for achieving IMM, with significant transformation of bank processes and policies, as well as pricing models and technology throughout the organization. Essential to such a program is a capable risk analytics engine and reporting solution; as the program should demonstrate to regulators that the appropriate governance is in place.
During the journey to IMM compliance, Accenture has observed that regulators require documentation of and transparency into the progress of the solution design and implementation. To meet this standard, banks should develop a well-documented, standardized, and appropriately monitored program that reflects strong executive sponsorship and predictability.
To help banks understand the elements of an effective IMM implementation, Accenture’s Finance & Risk practice has identified seven key considerations for developing, managing, and monitoring a robust and effective IMM program. In this blog series, we will be taking a detailed look at IMM implementation methodology and describe the major steps on the journey to regulatory approval.
For more information, see SlideShare deck: “Considerations for an Effective Internal Model Method Implementation”
Visit www.accenture.com/RegulatoryCompliance for latest insights on regulatory remediation and compliance transformation.
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