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CECL/IFRS9

New Accounting for Expected Credit Losses

The new accounting standards that come into effect in 2018 create the potential for income statement volatility and earlier recognition of losses and write downs, while requiring significant new public disclosures. For many banks, gathering detailed data to create and apply Expected Credit Loss models and the ability to support transparency into hedge accounting has been the focus of significant effort and expense. Though many countries are already under IFRS reporting, the initial implementations have been challenging and involved patches to existing systems, expensive manual processes, inefficiencies and a high risk of errors. In the US, FASB’s Current Expected Credit Loss accounting requirements pose a similar challenge, though compliance isn’t required until 2020. In either case, manual processes will no longer meet the need, even at smaller banks that are used to muscling through accounting changes.

Linking Default Estimates to Exposures

The solution is a comprehensive, transaction based analytical engine that can deliver probability of default estimates and link those directly to the related exposures and cash flows, delivering expected loss under changing credit conditions. These capabilities are built into the KRM solution and can also be used to as inputs into the capital management process, linking the two in a consistent, transparent and automated workflow.

Kamakura’s Integrated Risk Solution

Kamakura Risk Manager (KRM) completely integrates credit portfolio management, market risk management, asset and liability management, Basel II and other capital allocation technologies, transfer pricing, and performance measurement. KRM uses a solid analytical foundation for valuation, pricing, and hedging of a wide range of equity securities, fixed income securities, foreign exchange contracts. KRM also delivers an unmatched list of derivatives and exotics.

In addition to the powerful KRM platform, Kamakura Risk Information Services (KRIS) provides extensive risk information on credit risk and interest rates. Credit risk information in KRIS includes default probabilities, default correlations, implied spreads and implied ratings for a wide range of counterparties. KRIS is seamlessly integrated into the KRM platform to fully incorporate the credit risk information into all KRM analyses.

Kamakura’s Integrated Risk Solution

Kamakura Risk Manager (KRM) completely integrates credit portfolio management, market risk management, asset and liability management, Basel II and other capital allocation technologies, transfer pricing, and performance measurement. KRM uses a solid analytical foundation for valuation, pricing, and hedging of a wide range of equity securities, fixed income securities, foreign exchange contracts. KRM also delivers an unmatched list of derivatives and exotics.

In addition to the powerful KRM platform, Kamakura Risk Information Services (KRIS) provides extensive risk information on credit risk and interest rates. Credit risk information in KRIS includes default probabilities, default correlations, implied spreads and implied ratings for a wide range of counterparties. KRIS is seamlessly integrated into the KRM platform to fully incorporate the credit risk information into all KRM analyses.