Since 2007, banks have implemented and incorporated the requirements of the second pillar of the Basel Accord for internal risk management based on national regulations (including MaRisk and ICAAP). In reaction to the financial crisis, major changes have been initiated via the European Union, which have been transposed into national law in Germany with the MaRisk amendment (last amendment in December 2010).
The amended version has tightened and increased the requirement for internal risk management, especially in the following areas:
1. Strategy/strategy process
In view of changing parameters for banking institutions, MaRisk require a structured and continuous examination of the business strategy. This also includes a periodic and cause-based review of underlying assumptions, as well as the definition of targets and the development of measures for achieving these targets. A regular strategy controlling has to be set up to track strategy compliance and measures effectiveness.
2. Risk-bearing capacity
When analysing the future risk-bearing capacity, intended changes of own business activities and strategic targets as well as estimated changes of the economic environment need to be taken into account. In addition, the requirements for considering risk-mitigating diversification effects among risk types have been increased. Institutions that follow a periodic, P&L-oriented risk-bearing capacity approach also have to review and ensure their risk-bearing capacity after the balance sheet date.
3. Stress test
Stress testing has been enhanced with the introduction of “inverse stress tests” which are used to identify causes of a hypothetical inability to continue the business model. This involves analysing results that endanger the institution's economic viability. The focus can be set to either qualitative or quantitative aspects. Generally, the risk-bearing capacity is used as the starting point for the analysis. The dedicated examination of several risk factors and interdependencies as well as the simultaneous calculation increases transparency and management benefit, but at the same time leads to higher calculation efforts and a higher complexity. The results need to be integrated into the risk management and controlling process. The risk concentrations, in particular, become part of the strategy planning and have to be taken into account during stress tests. Furthermore, a stress case with a major economic downturn has to be modelled that should also be used to assess the effects on all risk types.
4. Liquidity risk/liquidity reserves
Based on the experiences of the financial crisis, the liquidity risk will face further regulation. The general requirements for liquidity risk have been tightened. The amended MaRisk version requires more detailed specifications for liquidity risk management and in particular the consideration of the short-term liquidity situation. Furthermore, the focus has shifted towards liquidity stress tests. These increased requirements especially affect capital market-oriented institutions.
Moreover, the scope of application for the requirements of the second pillar of the Basel Accord has been significantly expanded with regard to practical use. For example in Germany, as of 2009, all leasing companies have to meet the minimum requirements that are applicable to banks. With the MaRisk-VA, insurances have been provided with a specific set of regulations that are similar to the regulations for banks (see Solvency II), and since June 30, 2010, the InvMaRisk apply for capital investment companies accordingly.
In addition to the regulatory requirements, the banking supervision has reinforced efforts to execute on-site inspections with considerably increased requirements for a risk-adequate implementation.
zeb/ has developed a standard procedure model for the implementation of amended requirements as well as for a structured and comprehensive preparation for regulatory audits, and also executes trainings for management boards, supervisory bodies and supervisors. zeb/ combines high implementation and methodical expertise in regulatory and financial management issues with many years of experience in credit institutions, leasing companies and capital investment companies of different sizes and sectors.
Our service portfolio:
- Realisation of comprehensive MaRisk/ICAAP check-ups
- Analysis of institutions with regard to MaRisk compliance
- Review of processes, documentations and methods
- Review of technical implementation of functional requirements and data processing systems
- Assistance in MaRisk/ICAAP implementation
- Implementation of new MaRisk requirements
- rainings, coaching, special topic workshops
- Specific know-how for all subjects
- Preparation and monitoring of regulatory audits (§ 44 Prüfungen – Audits)
- Support for audit preparation
- Staff coaching
- Quick check to identify weaknesses
- Correction of minor defects and creation of implementation plans to remove other gaps
- Training and consulting of supervisory bodies
