Liquidity Coverage Ratio (LCR)
Parity was engaged by an Australian bank to develop and implement a solution for monitoring and managing liquidity risk under the Basel III framework. The assignment was core part of a project to migrate the bank to the Liquidity Coverage Ratio (LCR) governed by prudential standard APS210.
A solution was needed that could handle the data intensity, link to a number of disparate business systems, and provide a robust and efficient daily process.
Parity developed an LCR model utlilising the Microsoft Power BI suite of tools. This provided a number of advantages, including
- Meeting the requirements for a flexible, desktop solution
- The ability to collect and consolidate detailed account level data from a variety of sources
- Computational speed
Parity collaborated closely with the client to understand and interpret APS210 requirements, converting these into logical rules and to a data model. Parity also provided training and support during the validation and acceptance phases of the project, as well as guidance on the IT and systems integration.
The completed LCR model reports the risk adjusted liability profile to the client. This may be run on a daily basis or in real time as required. More than just a regulatory requirement, the model can provide the bank with the insight and analytics to run a liability structure that is optimised for risk and its specific business, whilst meeting regulatory requirements.
As a natural extension, the model also facilitates customer level analytics, insight into deposit flows, price sensitivity and customer behavior. The model facilitates this though a cube-type functionality that allows data to be “sliced and diced” for both standardized reporting and ad hoc analysis.