MONOCLE INSIGHT

Economic Capital System Implementation

Stories>Economic Capital System Implementation

In addition to the challenge of calculating regulatory capital to meet regulatory requirements, financial institutions face the further complexity of calculating economic capital as an internal measurement of risk. There are a number of methodologies and approaches adopted by banks worldwide for the calculation of economic capital, and in our experience, we have seen banks migrate from one methodology to another, sometimes requiring a completely new implementation of an economic capital software solution.

The successful implementation of a new economic capital model relies on significant change to the data engorgement process, specifically requiring significant data integration work and the integration of the new methodology into the fabric of the bank. In these unique situations where an organisation is migrating economic capital methodologies, Monocle is able to provide the very specific skillsets and technical knowledge needed to rapidly achieve this kind of implementation.

Monocle’s end-to-end approach to economic capital calculation within a complex, well-diversified financial institution involves extracting the necessary input files from the bank’s primary data sources and building all data integration rules into the bank’s internal reporting tool. We facilitate the successful migration of the organisation’s economic capital data, ensuring that the implementation of the new model is agile and able to absorb changes in hierarchical structures and any accounting or portfolio reallocations that may occur.

Monocle specialises in enabling the cohabitation of the regulatory process and the economic capital process, and we are able to navigate through these two worlds using our unique domain knowledge, identifying opportunities for using the same databases for risk aggregation and disaggregation processes. This ensures financial institutions not only meet regulatory requirements, but also extract long-term business value from the systems and processes at the heart of their operations.