Regulation

PwCs’ dedicated regulatory team can offer you tailor-made solutions to meet your requirements across a number of key areas.

How can we help

In the wake of the financial crisis, the Basel Committee on Banking Supervision has issued a number of proposed amendments to the current Basel II Accord, commonly referred to as “Basel III”. The South African Reserve Bank (“SARB”) is in the process of reviewing and adopting some of these amendments. The proposed changes will fundamentally impact the profitability and business models of many banks, as well as mandating significant process and systems changes.

We can assist Banks with the following services:

Basel II and Basel III specialist advice and consultation
Risk based capital management advice
ICAAP reviews
Regulatory capital optimisation solutions

The global financial crisis

The global financial crisis and its far reaching consequences have re-emphasised that credit risk remain one of the key financial risks facing the banking industry and economies worldwide.The global financial crisis and its after effects underwrite the need for state-of-the art methodologies and processes to ensure appropriate management of credit risks. PwC specialist credit team understands that sound credit risk management forms part of the core of a Bank’s operations and risk management framework.

Our specialist credit team can provide you with a wide range of assistance pertaining to the management of the key components of credit risk including:

Advice on credit risk policies and procedures and governance
Benchmarking and recommending improvements to your credit risk business processes
Validation of your internal credit models and the calibration of significant impairment
Model development and advice relating to pricing risk rating and credit scoring models
Performing a GAP analysis to ensure your impairment methodology meets the requirements of IAS 39. Including comparisons with best practice assumptions and models
Developing and advising on Basel II credit models used to calculate minimum capital requirements and comparisons of Basel II credit models, with best practice assumptions and models
Advice and recommendations on Basel II credit model IT and data processes
Credit risk training at all levels of the organisation, including account officers, analysts and internal audit functions

Liquidity risk

The Basel committee on banking supervision published a consultation document in December 2009, in the aftermath of the global financial crisis, on the International framework for liquidity risk measurement, standards and monitoring. The SARB subsequently published the proposed amendment to the banking regulations relating to liquidity risk in March 2010.

We have extensive experience in the management and measurement of liquidity risk and can assist banks with the following:

Perform a review or gap analysis against new liquidity standards or regulations
Design liquidity risk management frameworks
Liquidity risk management target operating models including:
Data models and information flows
Payment and settlement streams processes and information flows throughout the bank - including the distribution channel and network
Liquidity risk metrics and dashboards including early warning indicators
Assess the bank's current liquidity crisis management structure for responding to a crisis (this could be built on the back of business continuity principles)
Liquidity crisis simulations. We develop a virtual world that is ring-fenced from the rest of the bank for the testing of the liquidity crisis management process

Market risk

Market risk regulation has been extensively overhauled following the global financial crisis. As such most banks are engaging on implementing new requirements to maintain adequate levels of capital in order to account for market shifts and to better reflect the level of risks held on their trading books.

We have extensive experience in market risk and our services include:

Developing market risk frameworks and governance structures
Developing or validation of market risk VaR and incremental risk models
Stress testing frameworks
Trading risk control and limit structures

Operational risk management

The global financial crisis highlighted the necessity of a sweeping change of culture in the management of risk. This subsequently results in the ardent need for Banks to review the effectiveness and efficiency of their operational risk management practices as operational risk losses can be costly and impact the reputation of the bank negatively. Optimised operational risk management however improves the 'in control' status of organisations and the effectiveness and efficiency of their business processes.

We can provide assistance in the following areas to assist banks in optimising their operational risk management:

Designing, building and implementing operational risk management frameworks.
Developing and review of operational risk management strategies.
Developing of risk management processes. Operational risk reporting.
Operational risk mitigation - business continuity management, project risk management, information security, outsourcing and developing process controls.
Quantification of operational risk - measurement methodologies, loss data collection and categorisation, validation of scenario analysis, verification of the mapping of the required business lines and other requirements for the calculation of operational risk capital requirements.