Catch up on your compliance backlog with the requirement to move away from the Random Internal Ratings-Based (IRB) Approach which, even if approved, does not mitigate losses and therefore does not provide any surplus cash from the carrying value accounts of the CR3 template which is mandatory for all banks.
The requirement to abandon the IRB 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 | Last update: 15 Dec 2019).
Log in or open your account to access your Fintech platform for TPRM Accounting interaction recommended by the FED guidance of June 7, 2023, for Banking Risk Accounting and Counterparty Credit Risk essential to move away from IRBs approaches.
1. Your carrying value accounts to be programmed.
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).
2. 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.
Information for an overview
This is for an overview of the micro and macro impact of your carrying value disclosed accounts for compliance with the CR3 Template (Credit risk mitigation techniques).
(1) What's so bad about Internal Ratings-Based (IRB) approaches ?
Inherited from stochastic approaches used under Basel II, IRBs contain the same shortcomings that caused the 2008 financial crisis. Even provisionally approved by the national supervisor, stochastic approaches based on statistics and probabilities do not generate cash surpluses from internal loss mitigation processes and remain factors of aggravation of expenses and losses since, randomly, without removing the bank from the uncertainty of its future accounting results , nor from the bankruptcy, both of the bank and of related third parties, 15% of the average turnover of the last 3 years is allocated to the coverage capital.
•See bank failures of 2023: Citizens Bank, Heartland Tri-State Bank, First Republic Bank, Signature Bank, and Silicon Valley Bank). See also the Deloitte Risk Advisory Nordics warning from July 2023.
(2) 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, 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).
(3) Outlook for micro and macro benefits as banks and third parties move away from random IRB-based approaches, even if approved
This data is taken from the book currently being published.
3.1/ At the micro bank level for "On-balance sheet netting" under paragraph 22.68 of CRE22,
- 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.
3.2/ At the macro level.
A/ 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.
B/ 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.
(4) Legal framework to abandon random Internal Ratings-Based (IRB) approaches for an accounting system
Compliance falls within your legal framework set on January 1, 2023, by the BCBS (CRE22 - Standardized approach: credit risk mitigation) 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 January 1, 2025 for other countries including the EU, the United Kingdom and July 1, 2025 the United States.
See details below:
H. Formalize your orders for pro-forma invoicing
