Move away from the approved IRB with TPRM accounting Fintech interaction as recommended by the FED's interagency letter of June 7, 2023, with FDIC and OCC (without changing anything to the existing IT) to mitigate credit risk or counterparty credit risk as required for the CR3 Template (Credit risk mitigation techniques) mandatory for all banks to provide at each reporting date carrying value accounts related to the Business Indicator (BI) which is a financial-statement-based proxy for operational risk avoiding you, thanks to the financial Earnings Supplement generated, to deprive shareholders of their remuneration.
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The requirement to abandon the IRB approach (statistics and probabilities) inherited from Basel II which does not mitigate losses is explicit:
“Banks must include all CRM techniques used to reduce capital requirements and disclose all secured exposures, irrespective of whether the standardized or IRB approach is used for RWA calculation” (BCBS, DIS40 - Credit risk, effective as of: 01 Jan 2022).
Gap Analysis Requirements to be met with TPRM Accounting Interaction Fintech
(1) Where are the CR3 template data provided recorded?
• The carrying value contents provided by TPRM accounting Fintech are recorded in the usual income statements on the Earnings Supplement line.
(2) What is the regulatory compliance framework that the accounting interaction Fintech meets, complementing the existing accounting and financial system as a loss mitigation proxy?
The legal framework is that set on January 1, 2023, by the BCBS for the implementation of the final Basel III reforms, the transposition of which varies considerably on a worldwide scale from 2023-2024 for some countries such as Canada, Japan, Singapore, China and Hong Kong to 2025 for other countries including the EU, the United Kingdom and the United States.
• The requirement to abandon the Internal Rating-Based (IRB) approach governed by these regulations is explicit even if the IRB is approved for the transition as in Canada "Capital Adequacy Requirements (CAR)" guideline published on October 31, 2023, for 2024:
2-1/ “Written business line definitions must be clear and detailed enough to allow third parties to replicate the business line mapping. Documentation must, among other things, clearly motivate any exceptions or overrides and be kept on record” (BCBS, CRE - Calculation of RWA for credit risk, Effective as of: 01 Jan 2023).
2-2/ “The bank’s use of CRM techniques must interact with the bank’s overall credit risk profile” (CRE22.6).
2-3/ The disclosure of loss mitigation gain management accounts justifying the benefits in terms of economic capital and SOX ratio dates to 2010: “The recognition of the coverage of operational risk losses by insurance cannot exceed 20% before considering the economic capital accounts. The 20% cap should be interpreted to include mitigation arising from insurance and/or other risk transfer mechanisms collectively. Supervisors should, therefore, be cautious in assuming that 20% is an appropriate reduction to the total capital and should only allow a bank to recognize this degree of mitigation if appropriately justified (BCBS, 2010).
Loss Mitigation Interaction Products and Services offered in SaaS mode:
Step 1/ Programming your carrying value accounts based on cross-cutting interactions mobilizing your Total Paid Workforce or human capital as the driving force.
Log in for the carrying value contents of the forward-looking management accounts of template CR3 (Credit risk mitigation techniques): Request free access to Fintech SAF - V1
These are the processes of identification, collection and treatment of internal loss data that are essential prerequisites to capital calculation under the standardized approach for forward-looking management accounts to be programmed on a three-year plan to provide at each reporting date, the carrying value accounts of the Business Indicator (IB) which is a financial statement-based proxy for operational risk for the recognition of credit risk mitigation, such as guarantees and collateral (CRE22 - Standardized Approach).
Step2/ Train and certify your internal team in automated interaction
Click for HCMA certificate order form
This is to update the interaction skills of your internal team by learning by doing in 90 days, each at their workstation: the software is free until the 1st quarter reporting.
(1) CEO for Board decision making system.
(2) CFO for internal financial performance coordination system.
(3) HRD for motivation data based on incentive paid mobilizing the total paid workforce on internal financial performance objectives considering the risk appetite threshold. HRD tasks include monitoring of psychosocial risks.
(4) Operational Managers (OM) and Heads of operational units for “identification, collection and processing of loss data” (OPE25) providing non-GAAP carrying values linked to the Business Indicator (BI) which is a financial-statement-based proxy for operational risk. OM interaction tasks include variable pay or incentive paid statements.
Our cross-sector technical and methodological reference book of case studies for your internal teams:
Banking Risk Accounting and Counterparty Credit Risk.
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This is our TPRM-oriented Cost Accounting Book for the overview of the inseparable triptych:
"Government Efficiency + Business Efficiency + Total Paid Workforce Efficiency (Work that pays better by mitigating losses at each workstation)".
By reaching this milestone, you will have as practical support to accompany your teams and your clients from all sectors of activity, including the public sector, for an overview, our book co-written with John P. Koeplin, Associate Professor, Former Chair, Department of Accounting, University of San Francisco (currently being published). It is the tool allowing you to achieve within a Corporate Performance Management (CPM) approach beyond cost-killing budget cuts the inseparable triptych of "Government Effectiveness, Business Effectiveness and Total Paid Workforce Effectiveness (Work that pays better by mitigating loss at each workstation)".
• This book shows that breaking down the management of financial risks by sectoral silos which was the challenge of Basel III is worth it.
It demonstrates through sectoral case studies of banks, insurance companies, industries and services, including local authorities, how to implement and what will be the share of Earnings Supplement of the Parties on Fintech Interaction, considering the Carrying Value accounts of the CR3 Template (credit risk mitigation techniques) mandatory for all banks in liaison with third parties.
“Government Efficiency Department” outlook figures from our book to absorb budgetary deficits and Public Debt by reducing wasteful spending: - Case of the department led by Elon Musk and Vivek Ramaswamy in the USA with prospective figures for other countries.
This is loss mitigation governed by regulations in force worldwide for operational risk (BIS, OPE25) and credit risk (BIS, CRE22), when considering the inseparable triptych “Government Efficiency + Business Efficiency + Total Paid Workforce Efficiency (Work that pays better by mitigating losses at each workstation)”. These accounts demonstrate that “Government Efficiency + Business Efficiency + Total Paid Workforce Efficiency (Work that pays better by mitigating losses at each workstation) are worthwhile.
How Much of Parties' Earnings Supplement on Interaction Fintech considering the Carrying Value accounts of the CR3 Template (credit risk mitigation techniques) Mandatory for all banks?
(1) Impact on the strategic management of corporate income tax (CIT)
The reporting of the carrying value accounts of the CR3 Template (Credit risk mitigation techniques) provides Supervisors, in particular, central banks and corporate tax (IS) officials with the data that has been lacking until now in all countries for the programming and strategic management of deficits and public debt.
This avoids budget cuts and tax increases.
For example,
France, whose public debt as of September 27, 2024, according to INSEE is €3,228.4 billion (or 3, 530.58 billion USD), is struggling to find €60 billion to bring its deficit back to the 3% limit set by the European Commission. France is unaware that the banks' compliance with the carrying value accounts of the CR3 Template (Credit risk mitigation techniques) opens to the public treasury, considering the corporate tax rate of 25%, a margin of maneuverer for accounting result's Cash Surplus of $99,998,713,307.19 to be programmed on a 3-year plan (See book currently being published).
The compliance framework for French banks and third parties is governed from January 1, 2025, by the Directive adopted by the Council of the European Union, P9_TA (2024)0363, Wednesday April 24, 2024 - Strasbourg.
It is all the more urgent for France to accelerate the compliance of banks and third parties of banking pools with the CR3 Template governed by the European directive in force from January 1, 2025 that the In order to finance its expenses and renew its previous debts, on the sidelines of the presentation of the budget for 2025 by the government, the Agency France Trésor (AFT) revealed that France would have to raise a record amount of 300 billion euros (or 328 billion USD) in 2025 to finance its expenses and renew its previous debts (Capital with AFP, published on 10/10/2024).
Global Micro and Macro Earnings Supplement Overview
(2) Micro-level carrying value accounts data are processed by this book in accordance with the “On-balance sheet netting” provisions of paragraph 22.68 of CRE22.
The banking case studies provided cover 3 banking pools with historical management data disclosed by the income statements for the last 5 years, each pool comprising 1 bank and 4 third parties (insurance company, industry, services and local authority), i.e. a total of 15 entities. These are large accounts and SMEs (the smallest has 185 employees).
- Pool 1 bank saw its total unencumbered cash accounts (Bank EC + Customer EC) increase from "$0" before OPE25 to $9,685,274,442 after OPE25.
- Pool 2 bank saw its total unencumbered cash accounts (Bank EC + Customer EC) increase from "$0" before OPE25 to $8,303,585,037 after OPE25.
- Pool 3 bank saw its total unencumbered cash accounts (Bank EC + Customer EC) increase from "$0" before OPE25 to $8,499,635,572.
(3) Stakes considering the corporate tax rate
Government efficiency depends largely on the corporate income tax (CIT) which itself depends on the profit of companies which depends on the internal financial performance of loss mitigation by the total paid workforce which depends on the share of the additional gain paid in Incentivized Pay.
- Consequently, if Government Efficiency is limited to budget cuts, it will only target the tip of the iceberg without having the means of achievement.
The most obvious case is the Earnings Supplement target of 2,000 billion USD which had been stated in this perspective in the United States. This objective would only represent 0.44% of the real potential of Earnings Supplement of the US Government Efficiency which is $450,147 billion when considering the triptych.
3-1/ At the macro level of developed countries, the results and impact data to be programmed and planned for the prospective and strategic management of the mitigation of deficits and public debt, if we take the United States for example, we see that the USA has $450,147,106,579.58 in accounting results in cash surplus to be programmed on a three-year plan to mitigate deficits and absorb public debt based on the cash surplus of the Risk-Weighted Assets (RWAs) of the Bank Pools.
- Expected impact on the US Public Debt: the rate of the American public debt compared to the cash surplus (CS) of the accounting result of the three-year recovery plan of the RWA of the banking pools is 6.86%.
This gives the United States on the tax rate of 21% a margin of absorption of its public debt with 30% of the CS programmed the 1st year, or $135,044,131,973.87, for the 2nd year 60% of the CS programmed, or $270,088,263,947.75 and for the 3rd year 100% of the CS programmed, or $450,147,106,579.58.
3-2/ At the macro level of developing countries, the results and impact data to be programmed and planned for the prospective and strategic management of deficit and public debt mitigation, if we take China for example, we see that China has $2,448,502,666,135.83 of accounting results in excess cash to be programmed on a three-year plan to mitigate deficits and absorb public debt based on the excess cash of risk-weighted assets (RWA) of banking pools.
- Expected impact on Chinese Public Debt: the ratio of Chinese public debt to the cash surplus (CS) of the accounting result of the three-year plan for the recovery of RWAs of banking pools is 0.56%.
This gives China on the tax rate of 25% a margin of absorption of its public debt with 30% of the CS programmed in the 1st year, or $734,550,799,840.75, for the 2nd year 60% of the CS programmed, or $1,469,101,599,681.50 and for the 3rd year 100% of the CS programmed, or $2,448,502,666,135.8.
The book provides the real nominal forward-looking management accounts of absorption of budget deficits and public debt of 185 countries considering the taxable cash surpluses generated by compliance with the CR3 Template (Credit Risk Mitigation Techniques) of their banking pools.
Moody's Recap: https://www.moodys.com/web/en/us/insights/regulatory-news/implementation-status-of-final-basel-iii-reforms-varies-across-globe.html
Click here for the full country table : https://www.fsb.org/uploads/P111023.pdf#page=36
Carrying value accounts skill gaps to be filled to perform TPRM accounting interaction.
We know from the paper published in 2022 by Wiley that:
"Although the Human Resources (HR) function is an eminently transversal function of corporate accounting, neither the HR Managers nor the other corporate functions have been trained to perform the interaction tasks of their workstation to act in real time as an organizational team based on the operational risk appetite threshold.
The compartmentalization of teaching in universities and MBA programs in specialized disciplines have not solved the problem of real-time integration of HR-Finance processes. the cross-cutting or vertical skills required to act from their workstation as an organizational team based on the risk appetite threshold to create value" (Wiley, The Journal of Corporate Accounting & Finance, 05 July 2022).
Your technological and compliance advancement with us:
The stochastic approach tool (statistics and probabilities: IRB or decision-making) is repositioned downstream of TPRM accounting Fintech to be supplied with real cost-benefit data disclosed on the carrying value accounts of the bank and third parties and no longer as in the past with random data.
Placing several MBA disciplines side by side does not produce the interaction of mitigating workstation losses:
It should be noted that interaction, which is the ability to articulate skills and expertise to achieve a supra-ordinate objective such as the carrying value accounts of the CR3 Template relating to the Business Indicator (BI) which is a proxy based on financial statements for operational risk (an objective that cannot be achieved by the efforts of a single person or a single group), is different from inter or multi-disciplinarity. Interaction is a process of group dynamics or organizational dynamics that is not produced by placing several MBA disciplines side by side.
