RiskTech Forum

AxiomSL: To Party or Not To Counterparty, That Is the Question

Posted: 1 March 2018  |  Source: AxiomSL

In the past QFC 371 was applied to a specific set of GSIBs, as driven by the FDIC. However, the new set of rules require a much more detailed view of counterparty risk relationships on the books of a Financial Institution that has Total Assets of more than $50 Billion and significant derivative activity.

The QFC rules encompass 8 reports comprising 111 data points with more than 100 data checks and 60 validation rules to prepare the information required. In addition, QFC record keeping has to be made available to the FDIC upon request, within a 24 hour window.

Rather than viewing this as a regulatory burden, another way to look at this request is having a systematic view on all of your financial counterparties and thus the information necessary for resolution planning.

Counterparties… where are you?

The type of counterparties required for QFC include: a.) Sovereign b.) Financial Institution, c.) Corporate, or d.) Funds across a wholesale banking book. In addition, the specification requires all of the relevant data that explains the exposures to such parties. Thus for each counterparty, a QFC filing requires:

Just a cursory look at the landscape of requirements and we can see that QFC reporting will require:

Unexpected Counterparties at the Party

There is a 24 hour window to produce a view of a wholesale counterparty and collateral book for an institution. Our approach is to address the implementation phases in the following manner:

The Reconciliation Party

As we consolidate the counterparty data set that meet the QFC filing criteria, the next challenge is to reconcile the consolidated view of counterparties with the Financial Institution’s positions. From our experience, discrepancies may occur in the following areas:

Impact on Resolution Planning

Finally, the benefits of implementing QFC Reporting would include the following:

AxiomSL and QFC Filing

AxiomSL combines deep industry expertise with an intelligent platform and applications to deliver financial regulatory reporting, liquidity, capital & credit, operations, trade & transactions and tax analytics. Our global footprint spans 70 regulators across 50 jurisdictions, serving financial institutions with more than $39 Trillion in Total Assets. Our expertise in implementing QFC can be summarized as follows:

For more information, contact Supriya Sonar at ssonar@axiomsl.com