Risk management

Assessing materiality and verification of sustainability disclosures

In environmental, social and governance (ESG) reporting, materiality is crucial for enhancing transparency and accountability in sustainability and climate-related disclosures. Importantly, it helps identify and report on matters that are deemed significant, emphasizing their relevance to stakeholders.  Materiality comes in...

Mitigating the financial impacts of climate-related risks

The integration of environmental, social and governance (ESG) considerations into strategic planning is increasingly becoming a common practice among financial services firms. However, climate-related risks can also serve as drivers of financial risk for institutions. These risks can manifest through...

Adapting governance to spearhead sustainability more effectively

There are increasing regulatory expectations globally for financial institutions to disclose and demonstrate how sustainability-related responsibilities are allocated within the organisation. In this respect, the increasing global trend towards mandatory sustainability disclosure frameworks continues to underscore the significant role that...

Managing tomorrow’s banking risks

While the banking sector has shown resilience over recent years, the economic environment and geopolitical situation remain tense. So, what does this mean for risks to the banking sector? More specifically, what is the impact on capital requirements for banks...

Diversity in forward-looking macroeconomic scenarios

Under IFRS 9, forward-looking information is a key component of Expected Credit Loss (ECL) calculations. However, forward-looking information requires a significant level of judgement, making comparisons difficult to navigate. Indeed, similar to the use of post-model adjustments, forward-looking scenarios have...

Equipping NEDs to challenge private investment valuations

A recent major board reshuffle in one of Europe’s largest listed investment companies has focused attention on private investment valuations. It follows concerns raised by an ex-director over the robustness of the directors’ processes for approving investment valuations. The issues...

Banking: crisis, what crisis?

The rapid collapse of one of Switzerland’s most emblematic banks, following the demise of tech lenders on America’s west coast, has raised concern over banking stability. What are the consequences for the sector, the economy and for society? Gregory Marchat,...

Remote working: A growing target for hackers

The widespread use of working from home (WFH) during the pandemic, regardless of sector or geographical location has required organisations and their information systems (IS) management to be very agile in deploying or increasing their capacity for remote collaboration. Some...

NPL secondary market may solve the increase in credit risk

The identification and management of non-performing loans or NPLs as early as possible by banks are among supervisors’ current high-level priorities. Indeed, when prudential, monetary, and fiscal crisis mitigation mechanisms are tapered, the weakening of borrowers’ creditworthiness could materialise, along...

How banks can address supply chain risk

Local and international trends have transformed the way banks operate, affecting their capital positions and profitability. In particular, ongoing digitalisation programmes and technological innovation continue to add pressure on traditional banking models, including the supply chain. While management’s focus on...

Five steps to transforming banking operating models

With the current ultra-low interest rate environment and market volatility having a negative impact on banks’ returns and, ultimately, their capital positions, operating models must quickly adapt and become more cost-efficient to maintain profitability. This drive for cost-efficiency has become...

2021: The year of Brexit for banks

Brexit, or the UK's departure from the European Union, became a reality on 1 January 2021. In terms of the regulatory impact for the financial sector, and the banking sector in particular, the UK being a third country, UK banks...

IBOR transition and FRTB cross dependencies highlighted

The revised market risk framework – also known as the Fundamental Review of the Trading Book (‘FRTB’) – not only impacts an institution’s regulatory capital charge calculation for market risk, but also affects operational, governance and business strategies. FRTB brings...

IBOR Transition: modelling of SOFR risk factors

One of the major challenges of IBOR transition is the availability of historical data on alternative risk-free rates (RFRs) required to implement interest rate model changes or re-calibration. With the Secured Overnight Financing Rate (SOFR) only published since April 2018,...

Is SOFR a strong enough USD LIBOR alternative?

With COVID-19, being declared a pandemic on March 11, 2020, financial institutions have had to shift most of their resources to mitigate the risks that have arisen. This has adversely affected important activities, one of which is market participants’ efforts...

Covid-19 US policy changes: what banks need to know

Impacts from the COVID-19 pandemic have reverberated across every part of the global economy. Small businesses are struggling to pay their employees, banks are grappling with collapsing local economies, and many borrowers across the nation cannot meet their monthly mortgage...

Progress on transitioning to SONIA

The Risk-Free Rates Working Group (RFRWG) published an update on the impact of COVID-19 on the timeline for firm’s plans to transition away from GBP LIBOR on the 29th April. While the central assumption of LIBOR’s publication being ceased after...

ARRC acts for a smooth IBOR transition

The Alternative Reference Rates Committee (ARRC) continues to support market participants in their efforts to transition from USD London Interbank Offered Rate (LIBOR) towards the Securities Overnight Reference Rate (SOFR). Following the Financial Conduct Authority’s (FCA) March 2020 statement that...

IBOR transition: Fallback language developments

The expected 2021 disappearance of LIBOR requires robust fallback language for cash products and derivatives alike. Industry associations have taken initiatives to reform the historic fallback language of securities, with ISDA proactively leading the way on derivatives and national working...

Is Asia on its way to IBOR transition?

With Libor’s cessation date at the end of 2021 looming, global regulators are hastening their IBOR fallback strategies. Yet while market momentum has increased for multiple published RFR indices, among them the GBP SONIA, the EUR €STR, and the USD...

Is SOFR the ultimate replacement for USD LIBOR?

Financial market participants – at least the largest ones – are actively preparing for the expected discontinuation of the London Inter-Bank Offered Rate (LIBOR) after 2021. Transitioning towards a LIBOR-free world is a challenge that requires the involvement and coordination...

IBOR Reform – key takeaways

With significant IBOR reform on the horizon, Mazars brought together industry experts, practitioners and regulators to discuss the challenges and opportunities they face. Speakers included the Bank of England Market Division’s Alastair Hughes, EFRAG’s Didier Andries and Mazars’ IBOR lead,...

IBOR reform moves forward, but challenges remain

A raft of recent consultations on Ibor reform indicates that we may finally be making some progress. We have seen the International Swaps and Derivatives Association (ISDA) issue another round of consultations for Inter-Bank Offered Rates (IBORs) trying to solve...

LIBOR reform: Setting the cat among the pigeons

Could the transition period towards the new alternative Risk-Free Rates (RFRs) be more complex than initially envisaged? The speech given by Edwin Schooling Latter, Director of Markets and Wholesale Policy at the Financial Conduct Authority (FCA), on the 28 January...

An IBOR revolution is on its way

The whole financial system relies on reference interest rates, more precisely on InterBank Offered Rates (IBORs) whose integrity and reliability have raised some concerns since the 2008 financial crisis and the LIBOR manipulation scandal. These IBORs are used to determine...

Managing Operational Risk

In recent years, we have seen a tremendous surge of interest in measuring and managing operational risks, both as a result of regulatory developments in corporate governance and capital adequacy, as well as due to a growing realisation that an...

How insurers can make sense of risk

With Solvency II fully in force, the insurance industry has entered a new phase of transformational development. For many insurance companies, Solvency II has provided the opportunity to make better sense of risk and yet, insurance companies continue to operate...

TRIM: Is Winter Coming for Internal Models?

Measuring banking risks is a difficult exercise, but striking a balance between simplistic and overly complex measurement techniques is the key to accurate risk measurement. This was the substance of the European Central Bank’s (ECB) Chair of the Supervisory Board,...

Evolving role of AI with cyber risk

Cyber as an organsational risk In 93% of data breaches, the targeted systems were compromised within minutes. 83% of the time, those breaches were not discovered for weeks, leaving the attackers with plenty of time to do their damage and...

Sustainable banks must manage their risks

At a time when the European Banking Authority’s stress tests have provided valuable insights into the solvency levels of European banks, these banks are continuing their efforts to formalise the conceptual and operational framework of risk management. While changes in...

ICAAP / ILAAP: what will change in 2016?

Banks prepare for the reinforcement of prudential supervision via the Single Supervisory Mechanism (SSM). After successive waves of new regulatory requirements in recent years, the outlook for the calculation of risks and Pillar 1 capital requirements is becoming clearer. At...