Dutch IT services group Wolters Kluwer and London-based Financial Network Analytics (FNA) are forming an Asia Pacific alliance, which the companies promise will produce a faster and deeper analysis of market dynamics.
“Using network science, the FNA platform provides an intuitive visualisation of the complex interconnections between elements of financial networks,” stated Wolters Kluwer. “It creates a map that can communicate and help financial experts to understand market dynamics quickly and effectively.”
The solution takes complex data tapped from either public data sources or a financial institution’s (FI) data and crunches it into dashboards. The map created is displayed from a network perspective, centred around the FI’s portfolios, providing an overall view of the institution’s universe.
The FI can then access the dashboard to make decisions based on the information provided, whether they are a regulator looking at systemic risk, an asset manager who needs to take action on a portfolio, or a credit risk officer trying to identify what macroeconomic factors have the biggest influence on the institution’s customer defaults. The user can also perform adaptive stress tests to anticipate the overall effects.
“With heightened regulatory requirements, our banking customers more than ever need to respond to fast changing market conditions and manage increased reporting to regulators,” said Chris Puype, managing director, Asia Pacific, for Wolters Kluwer’s financial services business.
“Together with our other OneSumX modules, this intelligent solution will enable them to quickly run stress tests as well as facilitate compliance with the new international accounting standard IFRS 9.”
“We are pleased to work with Wolters Kluwer in Asia Pacific,” said Ran Fuchs, FNA’s chief executive officer (CEO). “The firm’s market reach and understanding of the various regulatory and strategic challenges banks in the region face makes it an ideal associate as we look to develop our presence here.”
Tackling IFRS 9
Separately, Wolters Kluwer has issued a white paper on how banks can best tackle the challenge posed by accounting standard IFRS, which “with its emphasis on forward thinking, is stirring anxiety in the financial industry”.
The paper, entitled ‘IFRS 9: Unexpected Gains From Expected Losses’, promotes a unified governance finance, risk and compliance (GFRC) management model, which the firm says can help banks adapt their business to thrive under the standard.
IFRS 9 Financial Instruments calls for firms to replace the traditional incurred-loss model for gauging credit exposure with one that uses a variety of internal and external criteria, plus a liberal amount of management judgment, to calculate expected credit losses (ECL).
The standard, which becomes mandatory in 2018, aims to encourage banks to develop models and mechanisms that will function as a “time machine” that allows them to forecast tomorrow’s credit conditions today and avoid the next financial crisis.
To tackle this challenge banks are advised to adopt a holistic approach for which the objective is strategic planning across the enterprise, encompassing finance and risk functions and backstopped by compliance, all within a sound governance architecture.
With the right command structure and a sturdy-yet-flexible data management system to aid in navigation, banks can, in fact, embrace IFRS 9 as an opportunity, not an unavoidable obstacle, steering toward the future with confidence, the white paper argues.
However, a London summit on the industry’s introduction of the technology cautions that testing and acceptance are still at an early stage and firms should proceed with caution.
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