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  • Welcome to RiskbOWl – the first closed community of Risk professionals to share ideas, best practices and get a sense of peer practice, with the ability to anonymously ask questions, share perspectives, run targeted polls, and discuss recent regulatory developments. Find out the latest developments in the RiskbOWl community, including user guidelines, community rules, and latest functionality

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    Welcome to RiskbOWl – the first closed community of Risk professionals to share ideas and best practices

    Through RiskbOWl, you will be able to anonymously ask questions, share perspectives, run targeted polls, discuss recent regulatory developments and so much more.

    We are already live with the pilot, and can’t wait for you to contribute as well. But before you do, two things:

    1. Security
    The only way this community will work is if we keep the environment highly secure and therefore we have integrated the login with our Oliver Wyman Single-Sign-On infrastructure that we use for all client work where the information being shared is sensitive.

    By now you should have received an e-mail from our IT services on how to set up your User ID on the OW Digital workbench. These are your RiskbOWl User ID and password.

    For any questions regarding your account set up please e-mail: riskbowl@oliverwyman.com

    2. Community rules
    Remember to maintain anonymity at all times and :

    i. Limit your discussion to details of methodologies (e.g. formulae or equivalent), including the relative merits of different methodologies for capital adequacy best practice.

    ii. Never disclose or otherwise discuss actual input or output values used by them in respect of any methodologies.

    iii. Never engage in discussion of information that relates to your institution or other’s commercial positioning or strategy.

    iv. Adhere strictly to the letter and spirit of competition and antitrust laws - RiskbOWl is a space for knowledge exchange, not collusion.

    We will be pre-screening all messages to start with, but depend on our community to be the first line of defense

    And lastly, remember this is a pilot: we are still fixing some bits and bobs, so bear with us with any hiccups while we make RiskbOWl the best it can be!

    Thank you for being part of this community. We think and hope it will transform how we share knowledge in the risk world in a timely fashion.

    The RiskbOWl team

  • Discover our latest thinking across hot topics in risk management, drawn from serving the world's leading financial institutions and deep, industry-renowned expertise across risk and finance topics, including surveys, primers and points-of-view

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    Conversations with our clients reveal the imperative of realizing the benefits from the promise of digitally transforming credit decisioning and lending journeys, driven by the need to control bank costs and retain customer loyalty in the face of competition from more nimble, digitally-native banks

    To better understand current trajectories in the lending transformation space, Oliver Wyman conducted a survey of banks across several markets, looking at the overarching burning platform, budgets, barriers to transformation, data, analytics, underlying technology, customer management, and organisational setup. In summary, our high-level, selected findings indicate

    Lending transformation is a high priority topic, with participants sequencing Retail and SME first in their lending transformation programs Respondents see the traditional incumbent breakthrough as the biggest competitive threat over the new fintech challenger looming on the horizon Decisioning time, revenue growth and cost reduction cited as top 3 benefits, whilst expected uplift is highest for customer experience Budget for lending allocation is approached on program level or on individual level, with very few respondents approaching it as a strategic objective Most budget is spent on customer journeys, internal workflows and underlying IT infrastructure rather than analytics capabilities

    Lending transformation survey infographic.png

    Reach out for more insight, but we’d be keen to hear from the RiskbOWl community how this stacks up against your lending transformation program – post your thoughts below !

  • Use this space for questions or broader topics pertaining to risk management, from the latest industry trends and regulatory developments, to the latest news and risk headlines potentially impacting the sector

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    Basel 3.1 implementation in UK delayed… once again
    Basel 3.1 represents the final set of international banking reforms in response to the Global Financial Crisis. The reforms aim to enhance banks' risk measurement and capital requirement calculations, striving to make capital ratios more consistent and comparable across institutions.

    But in consultation with HM Treasury, the PRA has decided to delay the implementation of Basel 3.1 in the UK by one year, to 1st January 2027. This adjustment was proposed to allow the regulator for additional time to observe the rollout of the reforms in the United States.
    The delay appears to stem primarily from the potential impact on proposed reforms of the Fundamental Review of the Trading Book (FRTB) front, which includes revised boundaries between trading and banking books, a more sensitive standardised approach for Market Risk, and the introduction of the Non-Modellable Risk Factors charge. Whilst this affects primarily banks with significant trading or investment banking activities, the regulator has chosen to take a comprehensive pause of the entire Basel 3.1 regulation to reassess the entire suite of reforms.

    But the reaction from more traditional banks in the UK with significant Credit Risk exposure is mixed. In our latest European IRB survey, clients reported that the new set of rules could lead to potential capital release for some of the Standardized Approach (SA) and Foundation Internal Ratings-Based (F-IRB) portfolios. Conversely, firms with significant Advanced Internal Ratings-Based (A-IRB) portfolios have deemed the approach conservative and have welcomed the delay.

    On the other hand, our belief is that the PRA will be less lenient regarding day-one compliance, as the regulatory text has been available in draft form since 2022. It is also notable that the model output floors have remained unchanged. This means that once the rules come into effect in 2027, banks will need to achieve the required levels of capital by 2030, effectively shortening the transition period to two years.

    Another greatly understated driver of the delay might stem from concerns about stifling the British economy, which has struggled to regain its footing post-COVID, with more stringent prudential regulation.

    This push ‘from within’ has been already observed elsewhere: Across the pond, Jay Powell, Chair of the Fed, commented back in 2024 that ‘broad and material changes’ were coming to the proposed Basel Endgame framework. Republican lawmakers have consistently expressed scepticism about the reform and have repeatedly called for the program to be scrapped.

    The ‘Endgame’ is set to become effective on 1st July, 2025. However, the new administration holds the future of the American banking regulatory landscape in its hands: Trump might push to simplify the reform or scrap the framework completely.

    Many domestic banks, lacking international operations, may advocate for abandoning current proposals in favour of frameworks that better suit the American context. On the contrary, recent bank failures have cast doubt on the resilience of smaller regional firms in the US, potentially strengthening the argument for a stricter framework aligned with international practices.

    Closer to home, Continental Europe seems to be taking the middle ground, as the Basel 3.1 rules became effective, with some modifications, in January 2025. But the most interesting point is that the FRTB part of the regulation has been pushed back 1 January 2026.
    On the Credit Risk front, a 2023 ECB survey determined that corporate-oriented financial institutions would be the worst hit by the reforms. While some capital release is expected from the model outputs, the output floor means that the overall benefit is negated in full.

    This puts the EU on an alternative, steadier path compared to the uncertain US and hesitant UK approaches.

    This disparity of rules require transcontinental banking institutions to dedicate increased resources to ensure compliance in the US, the UK, and Europe. Future-proofing activities and ensuring that the ability to act quickly remains in place in case new short-term steer emerges from the regulators will be fundamental to ensure risk transformation projects remain compliant once implemented.

    Some questions remain unanswered: will the US scrap the FRTB reforms completely? will the PRA modify the ‘near final’ regulatory text to align with the Fed? will Europe continue in its sure path towards complete Basel IV adoption?

    For now, we’ll just have to wait and see…

    Co-authored with Cian Mellett

  • The dedicated space to converse with peers and our experts on all aspects of credit risk, from the technicalities of modelling using internal approaches, credit decisioning and underwriting, credit risk appetite, governance and monitoring, provisioning, and regulatory requirements

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    We have made a change to our definition of default (required to close regulatory findings). The change is purely process-related and concerns a trigger for a default test, i.e. a trigger specification for a soft UTP criterion. Given data restrains, we could only argue qualitatively plus show based on a data sample that the change has no effect on default setting. Since we have no full historic analysis, the EGIM (ECB guide on internal models) seems to require that we quantify a MoC A for the remaining uncertainty that we might have missed cases in which the change might have an effect.

    Our questions:

    Would you quantify a MoC A for the effected PD models in such a case (only sample data, but qualitative argumentation for "no effect")? What would be a suitable approach to quantify the MoC A in this case? We are debating a bootstrapping approach, but lack "trigger with default" cases to draw from.
  • Recent years has seen the Treasury shoot up the agenda given the length of time the sector had operated in much more benign interest rate conditions. Sector turmoil in 2023 prompted supervisors and banks alike to ensure their ALM, liquidity, and interest rate risk capabilities were adequate for new rate realities. Discover the latest in our dedicated Treasury channel

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    After a decade of negative or zero interest rates, European economies entered a rising rate cycle in 2022. Now, as markets anticipate the beginning of an easing cycle, deposit betas are expected to catch up. The question is, are banks prepared to compete for deposits in this environment, which is unfamiliar to a whole generation of bankers?

    In 2024, a systematic approach to deposit management is not only a critical value driver but also a necessary defensive tool. By leveraging smart deposit management techniques, anchored on advanced analytics and operational capabilities, banks can optimise their deposit costs significantly.

    What actions have you taken? Where can the community help you?

  • The channel for all areas pertaining to the ability of institutions to deliver critical operations through disruption, comprising of prudential risk frameworks, internal governance, outsourcing, business continuity and crisis response. Recent years has seen much more scrutiny on the reliance of institutions on technology and third parties, with the former very much on the supervisory agenda, perhaps most explicitly embodied with the advent of the Digital Operational Resilience Act (DORA) in Europe

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  • With an increasingly complex and interlinked risk landscape, comes an equally complex, corresponding regulatory framework, and it's no surprise how high up regulatory compliance now features on the bank agenda. Check in with your peers on the issues driving this key risk management capability, including compliance operating model, regulatory horizon scanning, and financial crime compliance

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    There are two steps:

    (1) raw social data collection; and (2) analysis with NLP or GenAI

    (1) is the difficult part. You would need to know where the discussions are happening for your client or its industry – is it in the news, Facebook, Instagram, a forum? Once you identified the data source, you would need to find a way to collect the data, and the legal and cost question comes in to play.

    I recommend you to buy data from a third party (there are many of them). They can either provide you only the raw data feed (e.g. give me all the Facebook discussions about my brand), or they can provide you with a dashboard with standard analytics. If you only need one off data analysis for maybe a proposal, getting raw data and crunch it yourself is a cheaper, better way forward

  • Channel dedicated to discussion on the supervisory and societal expectations driving banks to meet their sustainability goals, by embedding ESG criteria into enterprise risk management frameworks to address climate-related and social risks, as well as financial institution's climate risk stress testing capabilities, and disclosure requirements

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    I have seen the following:

    Percentage of the Business/Institutional portfolio in high transition risk sectors Proportion of the mortgage portfolio exposed to high physical risks (by 2050 under a 4-degree warming scenario is one specific example). Believe this is based on property level assessment and then some % increase in PD. Some reputational ones around ESG scores

    However, I don’t believe anyone would set the thresholds at a level that would likely be binding. So skeptically, I think this is just for reporting and transparency at the moment – which is probably right given the limitations of climate risk modeling

  • From supervisory exercises, to internal scenario-planning, crisis simulation and war gaming, stress testing has become an established, post-GFC, risk management tool that institutions are expected to have in place in order to demonstrate the sustainability of their business model and ensure ongoing confidence in the bank. Discover the latest on stress testing in our dedicated channel

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    The EBA starts dialogue with the banking industry on 2025 EU-Wide stress test methodology

    The European Banking Authority (EBA) has published for informal consultation its draft methodology, templates, and guidance for the 2025 EU-wide stress test

    This step marks the beginning of the dialogue with the banking industry and builds upon the methodology used in the 2023 exercise, with improvements reflecting new insights and regulatory changes. Some important changes are introduced, notably

    Integration of the upcoming Capital Requirements Regulation (CRR3), set to be implemented on January 1, 2025. Considers the Commission’s announcement to postpone the application date of the fundamental review of the trading book (FRTB) Centralisation of net interest income (NII) projections and advancements in the market risk methodology to increase risk sensitivity

    68 banks from the EU and Norway, including 54 from the euro area, will participate in the exercise, thus covering 75% of the EU banking sector. The expanded geographical reach and incorporation of proportionality features aim to boost efficiency while ensuring the relevance and transparency of the results

  • Whilst dedicated risk management for the development, monitoring and validation of risk models has been long established, the advances in technology, analytics and data driving the banking industry has promoted such model risk frameworks to be updated and enhanced accordingly. Discover the latest impacting your peers across the model lifecycle - model definition, model vs non-model scope, validation, monitoring, periodic review, model risk reporting and governance

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    There is certainly precedent for this in loss forecasting, given various companies that need to follow both IFRS9 and CECL at different legal entity levels, and/or to follow different stress testing guidance for different regulators.   I can’t think of a case where I’ve seen it for the primary credit risk rating models however (at least not for literally the same exposures receiving two different ratings)

  • Organisational culture has long been recognized as a key component of risk-taking and risk-adverse behaviours, making it an important dimension underpinning the overall effectiveness of risk management more broadly within an organisation. Use this dedicated space for more discussion on methodologies, values, and behaviours within an organization that shape its approach to risk management and overall awareness and understanding of risk

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    Hi RisbOWl community.

    I have been thinking lately about the dynamics of the working relationship with 2nd and 3 LOD from a 1LoD perspective.

    While there is much talk about these dynamics from a high-level, ERM or governance perspective, those of us who are in involved more on the day to day interactions need to make sure we 'walk the talk'.

    While clear, continued communication is key, I have found the use of shared resources (such as evidence repositories, plans, collaborative query logs, etc) have really made a difference in the relationship we have built with our validators in the second line of defence.

    What does the community think about common techniques for increasing cross-line of defence productivity.

    Thank you in advance.

  • With as much change in the risk landscape and operating environment, discover insights and discussion on how developments in data and analytics are impacting risk functions, including deployment of AI, regulatory pressures such as BCBS239

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    Very good questions. I’ve come across this as well on operational resilience and
    cyber, where the challenges are similar

    Some thoughts on this (also with the ex-regulator hat on):

    Management bodies should acknowledge the challenge and be thoughtful around
    how to address this, e.g. through training; reporting; succession planning
    etc. We recently heard from a regulator that they were worried that sometimes
    these topics are ‘outsourced’ to one person on the exec/ Board who
    understands it, whereas they are looking for broader skills and knowledge in
    the group. Again I think this is important to acknowledge, including the fact
    that building those muscles take time In terms of ‘evidencing’ appropriate oversight and challenge by the Board,
    when supervisors look at meeting minutes they would expect to see critical
    questions being asked and a level of discussion (rather than the Board just
    ‘noting’ things) The quality of the materials and reports being presented to the Board is very
    important, both data, but also someone bringing out the ‘so what’ and in
    particular where there are areas of judgement and uncertainty, and where
    there are trade-offs
  • Our dedicated channel to discussing the implications of the EU's Financial Data Access (FIDA) Regulation, a key legislative proposal for the EU's implementation of open finance, enabling consumers and SMEs the right to authorise third parties to access their data held by financial institutions. FIDA builds open the EU's longstanding effort to enhance consumer protection and competition in electronic payments, and empower consumers to share their data in a securely, such it that allows access to a broader range of better and cheaper financial services

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  • Got a question? Ask away!

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