REGULATORY & ACCOUNTING COMPLIANCE

. . . . . . . . . ERMAS

4

. . . . . . . . . Riskmart

6

14 . . . . . . . . . Pillar II Analysis - Interest Rate Risk Banking Book

12 . . . . . . . . . Pillar I & II Analysis - Traded Market Risk

10 . . . . . . . . . Pillar II Analysis - Internal Credit Risk and Concentration Risk

8 . . . . . . . . . Pillar I Analysis - Credit risk

16 . . . . . . . . . Regulatory Liquidity Standards

18 . . . . . . . . . Forecasting Ratios and Funding Plan

20 . . . . . . . . . Hedge Accounting

THE ONE STOP SOLUTION FOR ALL YOUR RISK AND

FINANCE NEEDS

Regulatory Reporting is a crucial part of Enterprise Risk Management. With a constantly evolving financial regulatory environment, banks need to keep up with changes in a swift and cost-effective way.

Capital and liquidity are distinct but related concepts. Each plays an essential role in understanding a bank’s viability and solvency.

Liquidity is a measure of the ability and ease with which assets can be converted into cash to meet expected contractual obligations. The Basel III liquidity ratios require banks to hold sufficient levels of liquid assets to protect against constraints on their funding during times of financial turmoil.

Capital acts as a financial cushion to absorb unexpected drawbacks, because in order to remain solvent, the value of a firm’s assets must exceed its liabilities.

The Basel III capital standards require banks to hold enough capital to absorb losses in a severely adverse economic environment.

Prometeia’s unique business model offers a truly one-stop solution, combining extensive consulting services, an integrated and cross-functional software package, implementation support and methodological training. The ERMAS Suite solution stays on top of regulatory developments and meets all reporting needs. Its functionalities and interfaces have been designed to be fully adaptable, customisable, intuitive and easy to use for the client.

Covering Market, Liquidity and Credit Risk, as well as Stress Testing and Fund & Capital Planning areas, banks using the ERMAS solution are able to focus on their profitability targets while meeting all regulatory requirements in a sound and resilient way.

3

ERMAS is the advanced and flexible solution provided by Prometeia to support the active management of enterprise risks and maximise the value generation, while meeting the requirements set by the regulatory standards and by the specific business model of the bank.

The modular architecture of the Enterprise Risk Management Solution (ERMAS) Suite provides clients with an immediate answer to all their needs. The bank can activate each module independently, to fill a specific gap in its risk infrastructure, and benefit from the availability of one integrated solution, based on a common data warehouse and state-of-the-art technology.

ERMAS guarantees high processing performances and provides a customis-able and user-friendly interface, including an interactive reporting wizard for “real time” analysis and simulations. The reporting wizard allows banks to:

Relying on the quantitative skills of its financial engineers and on the experi-ence of its consultants, Prometeia can guarantee the quality of its solutions along the entire project cycle, from the design, through the implementation, up to the final system roll-out.

Highly skilled experts work alongside clients in all the phases of the set-up process to guarantee the best trade-off between a timely delivery and accu-rate and precise results.

Implementation Support

Produce standard sets of tableau based on pre-defined libraries of queries and easy-to-build reporting templates

Navigate instantaneously and dynamically the output data produced by the system through a flexible drag-and-drop facility designed to replicate MS Excel pivot tables

Export directly into Excel and csv format

Break down risk indicators and other output variables using a limitless number of analytical dimensions and aggregation keys

ERMAS

4

Ermas offers revolutionary high speed enhanced by advanced technologies such as Microsoft Parallel Datawarehouse

5

Prometeia delivers a portfolio credit risk solution as part of the ERMAS Suite. The portfolio credit risk analysis consists of minimum regulatory capital requirements to cover credit risk and economic capital calculation.

Regulatory capital analysis makes it possible to calculate and manage Basel minimum capital requirements to cover credit risk, adopting standardised or IRB approaches, using flexible configurations to comply with local regulatory requirements.

The ERMAS solution provides a thorough assessment of credit risk, using scenario analysis and advanced optimised Monte Carlo techniques.

It serves as a powerful management tool to calculate the minimum capital requirements in relation to credit risk by using the approaches required by the Basel agreement.

It also makes it possible to calculate the capital requirements in order to perform simulations and assessments that can also be used from an ICAAP perspective. Different stress testing types are coherently applied together with those defined by regulators.

Scenario analysis makes it easier to evaluate the expected requirements in different growth scenarios. The calculation is parametric and allows users to adapt it rapidly to in the case of changing regulations or other specific needs.

By using parallel calculational processes it is possible to run tests directly in the system in order to evaluate the effects of what-if analyses independently of the ICCAP requirements. The calculation can also be done regardless of statutory deadlines.

These two features allow the system to be used as an effective instrument for monitoring the capital requirements of the credit portfolio.

By enriching the asset information in input, risk data can be combined with income data to support credit policy procedures.

Pillar I Analysis Credit Risk

Flexible calculation of capital needs

to comply with local regulatory

requirements

8

Determination for all asset classes, products and approaches in a flexible environment by which us-ers can define local regulatory discretional weight-ing classes and calculations

Main Features

Comprehensive stress testing features which allow macroeconomic, composition and parametric stress testing analysis

Integration with economic capital and capital plan-ning modules to simulate capital requirements under bank business plan scenarios and compare regulatory and internal capital

9

C a p i t a l R e q u i r e m e n t - I R B A p p r o a c h

P D

A r e a o f c a p i t a l s a v i n g

C o r p o r a t eS M E w i t h l e s s t h a n 5 M l n E u r o s c o n s o l i d a t e d t u r n o v e r

A r e a w i t h o u t c a p i t a l s a v i n g

Co

eff

icie

nt

of

Ca

pit

ali

zati

on

Prometeia delivers a portfolio credit risk solution as part of the ERMAS Suite. The portfolio credit risk analysis consists of minimum regulatory capital requirements to cover credit risk and economic capital calculation.

Economic capital analysis allows productive management of the credit portfolio, simplifying the quantification of expected loss and control of risk capital. Internal credit risk calculation in addition to stress testing and capital planning features help to develop the Pillar 2 process.

Our solution provides a thorough assessment of credit risk, using scenario analysis and advanced optimised Monte Carlo techniques.

It serves as a powerful assessment model that calculates the economic capital of the credit portfolio.

The system obtains the distribution of losses and calculates the expected and unexpected ones subdivided into client concentration and geo-sectorial risk shares. In order to evaluate the systematic risk, it incorporates the default correlation rate matrix maintained by Prometeia. The calculations produced by the analysis are integrated with the regulatory capital and re-entered into a framework of stress testing and common calculation perspective, by supporting ICAAP procedures for class 1 banks. The extension of economic capital measurement towards credit policy procedures allows the optimisation of the portfolio even in terms of the distribution between sectors.

The calculated capital is allocated to individual relationships by means of Prometeia’s proprietary methodology and allows the absorption of capital according to all possible management views, thus increasing the potential of the credit risk monitoring system.

Pillar II Analysis Internal Credit Risk and Concentration Risk

Productive management of the credit portfolio, stress testing and capital planning help to develop the Pillar 2 process

10

Calculation of concentration risk and economic capital based on a robust internal actuarial model that adopts a Monte Carlo simulation method; both name and sector concentration risk are supported

Main Features

Capital is easily allocated at the transaction level, considering risk factors and correlations

Comprehensive stress testing features allow mac-roeconomic, composition and parametric stress testing analysis

Integration with capital planning module allows us-ers to evaluate planned economic capital for Pillar 2, Credit Strategies and Business Plan support

11

E c o n o m i c c a p i t a l / p i l l a r 2N a m e R i s kT o t a l R i s k

Pillar I & II AnalysisTraded Market RiskPrometeia provides a fully fledged solution for market risk management, supporting calculation of Pillar 1 and Pillar 2 capital requirements according to Basel approach in compliance with the local regulatory guidelines.

The standardised method to the computation of market risk capital charge is based on a building block approach, considering all risks relating to banking activities’ such as position, counterparty credit, foreign exchange and so forth. For the clients willing to implement internal models, Prometeia’s integrated Suite allows clients to perform Market Risk analyses at Bank and portfolio level, covering a wide range of instruments and a comprehensive set of methodologies.

Prometeia delivers the Market Risk solution as part of a comprehensive and integrated enterprise risk management platform.

12

A comprehensive solution that provides

the calculation of Market Risk capital

requirement while supporting the

definition of optimal hedging strategies

M a r k e t V a l u e A n a l y s i s

P V s e n s i t i v i t y

P r o f i t & L o s sV a r + V a r -

Value at Risk: Calculation of VaR metrics for equity, currency, interest and counterparty risk exposures. Delta Normal VaR measures are complemented with Delta Gamma and Component VaR

Backtesting: Prometeia offers a structural solu-tion to digitalise the backtesting processes, as-suming a separate contribution of P&L series. ERMAS Suite backtesting analysis provides our clients with a wide range on profit & loss source depending on instrument type and availability of Mark-to-Market data

Stress Testing: Market risk analyses are com-pleted with stress test scenario analysis, aimed at integrating VAR based measures. The tests can be performed on both hypothetical and historical scenarios, giving the opportunity to investigate which market scenario may more intensively affect portfolio returns. Output variables include overall and risk factor specific variations of present value, stressed VaR and other KRIs

Regulatory Capital Requirement: Basel capital re-quirements according to standardised and internal approaches, based on the industry standards for Pil-lar 1 and Pillar 2

Interactive interface to identify individual opera-tions and pools of trades on which to compute risk measures

Main Features

Flexible system setup, supporting multidimensional analysis and drill-down capabilities

Native reporting system, completely user definable in terms of structure and layout, with embedded tools for aggregation and decomposition of risk measures (CVaR, VaR, risk factor exposure)

Open database access, easy connection with exter-nal reporting tools, full Excel compatibility within a user-intuitive data environment

13

The strengths of the solution include:

Pillar II Analysis Interest Rate Risk Banking BookBy merging funding and interest rate risk into a methodologically consistent framework, ERMAS supports Pillar 2 reporting in compliance with regulatory standards and industry best practices.

A highly scalable and flexible solution, ERMAS enables banks to respond quickly to the evolution of their business, investment strategies and organi-sational structure. Approached in this way, ALM becomes a key strategic process to steer the banking business and foster the financial performance of the bank.

Together with an unparalleled coverage of different asset and liability class-es, ERMAS offers a wide range of modelling capabilities for demand depos-its, prepayable loans, mortgage pipelines, revolving facilities and off balance sheet items. Using these facilities, banks can easily integrate their own behav-ioural assumptions into the system, or benefit from Prometeia’s predefined econometric models. In this second case, Prometeia offers specialist consult-ing for calibrating parameters and adapting the methodological frameworks, based on the user’s specific needs and on the empirical data available inside the bank.

Key Risk Indicators are produced according to earnings and economic value perspectives, backed by comprehensive treatment of pricing rules, embed-ded optionalities and complex financial structures.

Standard and fully-customisable reports can be produced easily using graphi-cal user interfaces, in order to meet the analytical needs of Treasury, Risk and Asset Liability managers.

L I A B I L I T Y A S S E T

A t s i g h t

F i x e d

F l o a t i n g

14

0

8 0 0 0

- 8 0 0 0

6 0 0 0

- 6 0 0 0

4 0 0 0

- 4 0 0 0

2 0 0 0

- 2 0 0 0

15

An integrated view of all fundamental risk drivers affecting the balance sheet for an effective management

P r e s e n t V a l u e S e n s i t i v i t y

Advanced cash-flow modelling techniques for the analysis of funding and interest rate risks, integrat-ing current business, clients’ behavioural and new business assumptions

Main Features

Multidimensional views of the balance sheet structure, maturity and composition, including gap profile, duration analysis and funding ratios

Balance Sheet and P&L forecasting, explicitly designed to support strategic planning, portfolio optimization, and medium-term budgeting

Interactive simulation of future banking and mar-ket scenarios, define by product type, organisa-tional units and other analytical dimensions, based on alternative business strategies, portfolio mix, spreads and pricing assumptions

Static and dynamic sensitivity analysis, coupled with parametric and stochastic scenarios generation, de-signed to support stress and reverse stress testing

What-if analysis of alternative hedging strategies and assessment of optimal funding mix, instrumental to operational ALM and active portfolio management

Full coverage of FX Risk through static and dynamic analysis, including currency mismatch, basis point values and other market risk measures

Flexible system setup, supporting group consolida-tion, complex divisional structures and allocation of ALM exposures via Fund Transfer Pricing models

Staying ahead of the regulatory challenge can become a competitive ad-vantage, empowering banks to take a proactive approach to balancing liquidity costs and risk mitigation targets. Prometeia’s ERMAS Liquid-ity Risk solution enables the bank to optimise its economic performance, while taking into consideration all regulatory constraints.

ERMAS offers a comprehensive set of functionalities to compute liquid-ity metrics for national and supranational regulatory requirements. Pro-meteia constantly keeps up-to-date on the regulatory frameworks of 20 different countries, with particular focus on the EMEA region, in order to provide its clients with the best and most efficient approach to liquidity risk compliance.

Prometeia’s solution is extremely flexible and easy to use, enabling users to deliver group and individual reports according to the regulatory templates and in the predefined format required by the authorities:

The sophisticated financial algorithms and the impressive adjustability of ERMAS applications allow the bank to manage liquidity risk from the highest aggregation level down to the single deal detail. This includes the generation of stable deposits, encumbrances, ECB pooling, liquidity buffer, eligibility rules and haircuts, amongst others.

Prometeia’s fully integrated Liquidity Risk engine stems managerial and regulatory liquidity analysis from a single data source.

The module can be integrated with internally developed models for man-agerial analysis, such as behavioural models for sight deposits, loan pre-payments and committed credit lines. A robust stress test engine com-plements its functionalities, to provide a complete understanding of how liquidity risk behaves under various market and bank scenarios.

Regulatory Liquidity Standards

16

Basel III ratios and related reporting requirements: LCR, NSFR and other monitoring metrics

Liquidity Risk Regulatory Reports compliant with EBA/ECB templates

Local reporting templates for more then 20 differ-ent countries

Data and documentation to support the Internal Liquidity Adequacy Assessment Processes (ILAAP)

Automatic production of regulatory reports directly from the system

Main Features:

Exportable documentation in all possible formats (csv, XBRL, XLS, etc.) including those specifically required by central banks and national regulators

Fully customisable to fulfil any regulatory request for all jurisdictions including national and suprana-tional regulatory bodies

Multi-currency capabilities for easy reporting in a wide range of currencies

Adjustable time horizons for calculation of LCR and other metrics for both liquid assets and collateral-ised deals

Individualised and consolidated reporting auto-matically produced by Prometeia’s single frame-work solution with multiple customisable perim-eters of analysis

Ability to drill deep into the data to understand the causes of potential breaches of liquidity limits at single deal level, accompanied by a detailed audit trail based on regulatory prescriptions

Full auditability of the entire data infrastructure, showing the whole path of additions and correc-tions in a dedicated diagnostic file

Extensive capabilities of parametric configuration for various modelling aspects, such as: time horizon, stress scenarios, haircuts, etc

A comprehensive solution to simplify the compliance with the regulatory liquidity risk standards

17

0 150

100

50

0 150

100

50

L i q u i d i t y C o v e r a g e R a t i o

S t o c k o f h i g h - q u a l i t y l i q u i d a s s e t s

N e t c a s h o u t f l o w s

62.275

116.454174.40357.949

c a s h o u t f l o w sc a s h i n f l o w s

N e t S t a b l e F u n d i n g R a t i o

A v a i l a b l e S t a b l e F u n d i n g ( A S F )

R e q u i r e d S t a b l e F u n d i n g ( R S F )

277.356

248.662

L C R - - - - 5 3 % N S F R - - - 1 1 2 %

The international regulators are placing increasing importance on monitoring liquidity risk in a prospective view in order to assess the sustainability of the strategic plan, the business model and the sanctioned risk appetite.

In this context, the funding plan process is evolving to comply with regulato-ry standards, including the projection of the liquidity ratios (LCR and NSFR) under stress scenarios.

Prometeia offers a comprehensive solution to forecast the bank’s liquidity risk profile under a variety of different scenarios, based on going concerns and regulatory stress assumptions.

The functionalities of the ERMAS Interactive dynamic simulation module al-low the fund planning process to be supported in a variety of different ways:

Liquidity Forecasting Ratios and Funding Plan

Forecasting the run-off and dynamic funding volumes, with the possibility to interactively modify the business strategies for each analytical dimension

Projection of future liquidity risk indicators (LCR and NSFR) according to the complementary regulatory criteria (Basel III, CRR, local regulatory)

Analysis of the cost of funding dynamics, taking into consideration the trend of sovereign spreads, pass-through assumptions, expected mark-ups and mark-downs resulting from the evolution of credit spreads (PD/LDG)

The module also allows market and credit impacts to be analysed in order to identify potential “spiral” effects and evaluate possible mitigation actions.

18

Automatic simulation of the liquidity risk indi-cators based on a static projection of balance sheet items

Implicit reconciliation of LCR and NSFR with standard regulatory templates

Embedded calculation of liquidity regulatory drivers (e.g. stable deposits vs not stable depos-its, classification of liquidity buffer) that users can easily modify to evaluate the impact of dif-ferent assumptions on the prospective ratios

Specific tools to manage complex funding strat-egies (e.g. covered bonds/ABS programmes)

Real-time interactive and

on-demand simulation of

prospective funding risk and

liquidity ratios

1919

Market scenarios configuration based on user-defined libraries of setup parameters, easily con-figured through graphical interfaces and import/export tools from XLS files

New business trends can be defined with alterna-tive techniques, inserting new volumes, specifying target point/average amounts, and growth/disin-vestment percentages

Accurate definition of the financial characteristics of the new products, using replication algorithms based on the current balance sheet mix or, alterna-tively, discretionary rules set by users

Fully-fledged credit and liquidity risk adjusted pric-ing tools, allowing users to simulate different pric-ing strategies, based on risk parameter evolution and the bank’s commercial strategies (risk free, market rates dynamics, credit risk parameters dynamics, funding liquidity spread dynamics, com-mercial spread dynamics)

Full integration of behavioural models, in order to represent the attrition profile and the rate stickiness of each product under alternative assumptions

Standard regulatory reports (i.e. EBA Funding Plan Templates) and custom reports, available in an Ex-cel style grid, offering increased granularity of the breakdown dimensions and temporal horizon

Main Features:

Funding plan structure by product/counterparty aligned with the regulatory template

Product catalogue with customised trees enabling multiple waterfall logics to insert strategies on new volumes and spreads, with “cascading” mechanism on the lower hierarchical levels

User-friendly tools to model volume and pricing assumptions, aligned with the commercial strategies of the bank about the generation of incoming assets and liabilities

Predefined specific drivers needed for projecting the regulatory ratios LCR and NSFR, that can be used alternatively via:

Simplified static approach: drivers are compiled automatically using the embedded structure of the static ratios and kept constant for the simulation horizon

Dynamic approach: each driver can be modified by the user along the simulation buckets in order to compare results in different scenarios

0M 3M 6M 9M 12M

100%

60%

140%

L C R S c e n a r i o 1 L C R S c e n a r i o 2 L C R S c e n a r i o 3

P e r s p e c t i v e l i q u i d i t y

c o v e r a g e r a t i o

20

Hedge AccountingHedge Accounting is the instrument envisaged by the IAS / IFRS principles for reducing the volatility of the income statement originated by the MTM valuation of derivatives.

ERMAS Hedge Accounting Module is designed to cope with the overwhelming complexities of IFRS schemes, ensuring an easy implementation of the Hedge Accounting process and a full compliance with industry best practices.

ERMAS provides a fully adaptable, comprehensive and easy to use solution that meets all Hedge Accounting needs, from the selection of the eligible hedged items, through the definition of the optimal hedging strategies, up to the execution of the effectiveness tests.

ERMAS Hedge offers advanced methodologies for pricing, risk modelling, fair value calculations and regulatory reporting. It covers all the dynamics of interest and exchange rate hedges in accordance with IAS39 and IFRS9 principles.

Within this module, banks can manage hedging transactions relating to either specific items or portfolios of assets and/or liabilities. As a result, specific functionalities are designed both for micro and macro hedging.

An “optimal fit” functionality automatically allows the definition of the target hedging percentage, in order to maximise the effectiveness of the hedging test.

Behavioural dynamics are also considered for the management of the two HA frameworks supported by our solution, fair value and cash flow hedge.

h e d g e d i t e m

he

dg

ing

in

str

um

en

t

S h o c k - 2 0 0 b p9 9 , 8 %

S h o c k - 1 0 0 b p9 8 , 9 %

S h o c k + 1 0 0 b p9 7 , 1 %

F l a t t e n i n g9 4 , 3 %

S h o c k + 2 0 0 b p9 7 , 1 %

S t e e p e n i n g9 5 , 1 %

R e t r o s p e c t i v e t e s t d e l t a F V

21

Specific functionalities for the identification of homogeneous assets and liabilities, to be designated as hedged items within the macro-hedging scheme

Recalibration of the hedging relations in order to take into consideration prepayments, defaults, derivatives unwinding and other events affecting hedging lifecycle

Main Features:

Fully automated workflow management for hedging portfolios and data logging of changes in FV, both on a periodical and cumulative basis

Possibility to apply what-if and stress scenarios to test the hedge effectiveness under different market environments

Production of the hedging card and reporting for managerial and auditing purposes

FV calculation of the hedged item and instrument based on a multi curve approach, including the valuation of embedded options. Exogenous fair values can also be used, interfacing the HA Module directly with the external source - system (e.g. front office)

Calculation of the hedging ratios with both a prospective and retrospective approach. Multiple threshold conditions can be included to maximise the effectiveness

Utilities for interactive reporting and production of customised output for external accounting systems.

Full transparency of system setup and portfolio definition, including audit trail and diagnostic of all calculation processes

L o w e r t h r e s h o l d

H e d g e r a t i o

U p p e r t h r e s h o l d

R e t r o s p e c t i v e t e s t o v e r t i m e

1 3 0

1 4 0

1 2 0

1 1 0

1 0 0

9 0

8 0

7 0

6 0

5 00 1 - 1 0 - 1 5 0 1 - 0 5 - 1 6

h e d g e d i t e m

S h o c k + 2 0 0 b p9 7 , 1 %

A fully adaptable and comprehensive solution to simulate and fine tune the effects of the hedging strategies on current and expecting earnings

ITALY | BEIRUT - ISTANBUL - LAGOS - LIBREVILLE - LONDON - MOSCOW - PARIS

Where we are

Our Core MarketsEUROPEAlbaniaBosniaBulgariaCroatiaFranceGermanyHollandHungary

IrelandItalyLuxembourgPolandPortugalRomaniaRussiaSlovakiaSlovenia

SpainSwitzerlandUK

AFRICAAlgeriaBeninCameroonChad

EgyptEthiopiaGabonGuineaMauritaniaMoroccoNigeriaTogoTunisia

MIDDLE EASTIranJordanKuwaitLebanonOmanSaudi ArabiaTurkeyUAE

PARTNERSHIPS RECOGNITIONS

Prometeia’s ERMAS Suite is our flagship solution, integrat-ing enterprise risk management with balance sheet and per-formance analysis.

Relying on highly innovative technology, the platforms sup-ports ALM, market risk, liquidity risk, credit risk analysis, credit process and regulatory reporting.

Our ERMAS Suite and implementation services offer a fully adaptable and all-inclusive solution for every risk manage-ment need.

We help clients in the analysis, monitoring and management of all risk & performance dimensions, with the aim of maximising their profitability while meeting regulatory requirements.

The application is complemented by a workflow-driven software platform, ECAPro Suit, that supports the credit origination process and works in conjunction with ERMAS risk analytics.

Prometeia is a leading provider of consulting services and IT solutions focused on Enterprise Risk & Perfor-mance Management.

Since 1974 we supply highly-specialized advisory, analytical tools and training programs, integrating quantitative models, market and customer data, financial and economic scenarios.

With over 600 industry experts, we currently serve more than 200 financial institutions in 20 different countries, through a consolidated network of foreign branches and subsidiaries located in Europe, Africa and the Middle East.

Our client base includes primary financial institutions, cen-tral banks, multilateral organisations, as well as local banks and credit unions.

Prometeia’s business model sets us apart from other indus-try players as it combines an unparalleled offer of Risk & Performance solutions with extensive consulting services, implementation support and methodological training.

CustomerSatisfaction Award

www.prometeia.com