Kamakura LCR/NSFR

Kamakura provides everything a bank would want in gaining a holistic and integrated risk management solution. It means the Kamakura Risk Manager has the ability to solve credit, market, liquidity, CVA and ALM risk on a consistent analytical basis. By viewing its entire exposure within a single database, accompanied by unrivaled speed to generate cash flows at a transaction level and calculate complete risk measures, the bank can manage their risk profile effectively. Kamakura’s capacity to simulate balance sheet under different assumptions / scenarios both on a deterministic and stochastic basis, enriched with FTP methodology, IFRS 9 accounting standards and RWA calculations, help the organization to provide a real insight into its true risk profile and support strategic goals in Risk, Finance and Treasury.

A truly integrated system might also mean the organization can generate cash flows for both risk management (interest rate, liquidity risk) and transfer pricing measures using the same consistent approach.

Figure 1. Kamakura building blocks

Liquidity coverage ratio can be seen as a key reform to develop a more resilient banking sector. The objective of the LCR is to promote the short-term resilience of the liquidity risk profile of banks. 

It helps banks to ensure adequate stock of unencumbered high-quality liquid assets that can be converted easily and immediately in private markets into cash to meet their liquidity needs for a 30-calendar day liquidity stress scenario. The LCR will improve the banking sector’s ability to absorb shocks arising from financial and economic crisis scenarios. 

Kamakura’s solution is not only fully Basel III compliant but furthermore offers you a possibility to optimize banks business model within given LCR regulatory restrictions, including: 

  1. Calculation of LCR results at transaction level and assignment to LCR Rules,
  2. Capturing dynamic balance sheet assumptions & forecast future LCR,
  3. Enrich calculations with stress testing and pre-asses possible future market/credit scenarios and LCR ratios,
  4. Managing whole group with Kamakura Jurisdiction functionality and one process,
  5. Assigning multiple LCR rules to one transaction,
  6. Use Liquidity Coverage Ratio results for further analysis e.g. to allocate liquidity costs in FTP

Kamakura advantage for LCR/NSFR

  • LCR/NSFR shares the same data assumption with ALM, FTP, IRRBB and all other modules within KRM.
  • Ability to forecast LCR and NSFR beyond the current month, i.e. n months from the current period.
  • Forecasted LCR/NSFR sharing the same business assumptions, such as customer behaviour assumptions (prepayment/rollover) or business plan (new business assumptions) with ALM.
  • The ability to share stress testing between LCR/NSFR with all other modules within KRM.
  • LCR/NSFR Regulatory report line item can be traced line-by-line back to result generated by KRM for ease of reconciliation and regulatory audit.
  • LCR/NSFR result generated by KRM can be traced record by record back to the source.
  • Support multiple jurisdictions.
  • Support sandbox environment for ad-hoc scenario analysis.
  • Support default adjusted LCR/NSFR.
  • Cash flow generated is consistent with ALM, FTP and IRRBB.
  • The Define & Assignment function allows business users to configure business assumptions without needing IT resources.
  • Support user defined LCR ratios for any time bucket (30-day stress vs 15-day stress) for internal liquidity management.
  • Fast processing speed allows daily LCR to be generated for close liquidity monitoring.
  • Easy and flexible to maintain regulatory guidelines changes as all rules are parameterized.