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Regulatory Risk and Compliance

Non-Performing Exposure and Forbearance /Definition of default​


CubeMatch was hired by a Dutch Banking client to provide Business Analysis to aid the review, redevelopment, and implementation of the process for recording and reporting of the new definition of default, Forbearance and Non-Performing Exposure because of Internal Models Investigation by De Nederlandsche Bank (DNB).  The main aim of the project was to remediate the DNB findings, enforce clear data ownership, data quality monitoring and improvement of processes to future-proof the bank in line with governance, data, and methodology practice guidelines. 

CubeMatch Deliverables

  • Business requirements of bank-wide default policy, encompassing EBA guidelines on the application of the definition of default​
  • Creating and formulising Bank-wide default and forbearance policy for submission to DNB (CRR) as well as document creation (ITS/RTS)​
  • Writing of executive summaries and cover letters for internal audit and external regulator (DNB) ​
  • Revision of Model Risk Management Policy, Model Development and Validation Standards ​
  • Conducting business impact analysis for implementation of the DoD solution​
  • Drafting of Lending policy ​

CubeMatch Approach

  • Gap analysis to identify to-be policy, processes, and procedures due to the new definition of default​
  • Establishing new unlikeliness-to-pay and days-past-due frameworks for application to client’s systems and default process
  • Creation of ‘Implementation Plan’ to document key stages in implementation and decommissioning of impacted tools​
  • Business impact analysis, on disputed outstanding invoices, to determine the non-material impact of the out-of-scope system data
  • Memorandum creation for demonstration of impacts to the regulator
  • Investigation into data interfacing for reporting (FinRep/AnaCredit)​

Benefits Delivered

  • Expertise in regulatory-bound deliverables (and on tooling)​
  • Improvements in the process of default and loss registration, tracking of NPE, classification of forborne exposures across the entirety of the bank
  • Minimisation of operational impact ​
  • Making way for other bank-wide policies in terms of alignment on definitions, procedures, reporting data, and governing bodies​
  • Critical input for remodelling of corporate PD/LGD models​