Risk transparency reporting for funds (Basel II, VAG, GroMiKV, Solvency II)
Your challenges
Nowadays, there is an ongoing trend reinforcing the importance of risk and capital management requirements for main financial players.
Credit institutions and investment firms are facing stricter requirements on their large exposures and may consequently find interest in investing in investment funds for their short-term financing needs. Insurance companies are reinforcing regulatory capital requirements with the transposition of the Solvency II Directive in 2013. Moreover, in response to the recent financial crisis, the Basel Committee is updating their guidelines with the upcoming Basel III.
Since January 2007, on application of the Basel II Capital Requirements Directive (CRD), European banks and investment firms need to calculate their capital requirements by risk weighting their exposures. Therefore, considering future financial regulations, there is a need for investment funds to compute solvency ratio in adequacy.
For example, a non-rated UCI currently holds a portfolio of AAA sovereign bonds, depending on the application or not of the 'look-through' approach under the different methodologies, banks and investment firms may apply the following risk weights:
Solvency II is a new risk regulatory requirement, based on three pillars covering capital adequacy, adequacy of risk management processes and disclosure of risk information, for insurance companies carrying business in Europe.
It claims transparency thus becoming a new indicator for risk management policy relying on both qualitative and quantitative aspects. As for Basel II, capital requirements may drastically vary from an exposure class to another as illustrated below:
Based on sound experience and strong expertise, Deloitte can assist to succeed in these new challenges. Indeed, thanks to in-house automated solutions and internal expertise; we are able to deliver reporting compliant with the different regulations.
Who needs risk transparency reporting?
Computing the solvency ratio can be seen as a win-win situation, for both banks/investment firms and fund administrators/promoters:
| Transparency risk reporting | ||
| Asset managers | Custodian, Fund admin... | |
| Advantages | - Enable their clients to reduce capital requirements - Regulatory diligence and advisory - Enhance portfolio optimisation according to Basel II & Solvency II |
- Key competitive advantage as demonstrate capabilities in complex reporting - Broader range of services |
| No transparency risk reporting | ||
| Asset managers | Custodian, Fund admin... | |
| Disadvantages | - Potential disinvestment from investors | - Being not able to deliver services required by clients - Being excluded or at least penalised in RFPs process |
Deloitte risk transparency reporting services
We are recognised as a partner for more than 15 fund promoters/administrators annually representing more than 800 reports under the following solutions.
| Credit risk reporting | Large exposure reporting | Solvency reporting |
|---|---|---|
| Solvency ratio reporting under Basel I and Basel II rules (KSA, Grundsatz I, French regulatory ratios…) | Large exposures reporting under CRD requirements (GroMiKV, granularity assessment…) | Reporting for insurance companies under Solvency I (VAG) and Solvency II rules (based on 2009/138/EC) |
We intervene on a broad range of national reporting format (Austria, UK, Germany, France…) and through our extensive network, we can deliver and/or provide assistance on much wider national reporting requirements for investment funds
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