The solution includes the ability to run impact analysis assessments. This will allow banks to understand how SA-CCR will affect their capital requirements and plan accordingly. The solution has been built on the core AxiomSL platform, which will also support the other Basel capital calculations that will be implemented over the coming years, including the Fundamental Review of the Trading Book (FRTB) and Interest Rate Risk in the Banking Book (IRRBB). In this way, AxiomSL is providing banks with an opportunity to prepare strategically for what has been dubbed ‘Basel IV’.

As part of SA-CCR, banks around the world will be obliged to use a new methodology to calculate their exposure to counterparty credit risk and the corresponding capital reserves needed to mitigate this risk. SA-CCR will be mandatory for all over-the-counter (OTC) derivatives, exchange-traded derivatives (ETDs) and long settlement transactions, replacing the incumbent Current Exposure Method (CEM) and Standardized Method (SM).

AxiomSL’s solution automates the computation of exposure at default (EAD), using the new SA-CCR methodology. It provides the new potential future exposure (PFE) calculations (including add-on calculations for different asset classes) and the new replacement cost (RC) calculations mandated for both margined and unmargined trades.

The solution allows banks to run the SA-CCR calculation logic in parallel with their current calculation logic to understand how they will be impacted by the new requirements. This will also ensure banks can migrate smoothly from their incumbent calculations to those mandated by SA-CCR when the new requirements come into force.

Due to its high-performance capabilities, the solution can process large volumes of data and run the SA-CCR calculations rapidly. The solution also boasts unparalleled transparency, including the ability to drill down from the outputs to the source data. This is intended to give users confidence in the accuracy of their figures and to enable them to respond quickly to queries from regulators.

AxiomSL will continually monitor changes to the SA-CCR calculations and provide updates when they are amended. These regulatory update releases will be separated from software releases, allowing banks to upgrade quickly without undertaking regression testing.

“SA-CCR is one of a number of significant changes to the Basel capital adequacy requirements that will come into force over the coming years - the others include the FRTB and IRRBB. Instead of focusing on each of these requirements in isolation, banks need to think strategically about the entire package of changes now,” said Nicola Hortin, Head of Regulatory Analysis Team EMEA, AxiomSL. “We are pleased to offer banks a comprehensive solution that includes the calculations and computation functionality they need to comply with SA-CCR. By building our SA-CCR and other capital calculation solutions on the same platform, we are giving banks an opportunity to tackle the requirements strategically rather than relying on a patchwork of point solutions. This will significantly reduce the cost and complexity of compliance for them.”