Implementation of ProVision in PJSC “MTB BANK” — a Comprehensive Software Product for Impairment Assessment in Accordance with IFRS 9 Requirements
PJSC "MTB Bank" is a commercial universal bank with Ukrainian capital, with its headquarters located in Odesa. The bank operates efficiently and transparently in the financial market of Ukraine, constantly improving methods for developing successful business, establishing partnerships with its clients through the implementation of modern information innovations.
The bank serves individuals and legal entities, updates its product line, and offers financial instruments including treasury operations, electronic banking, factoring, financing and leasing, international banking services, insurance services, brokerage services, and capital management services.
CHALLENGE
PJSC “MTB BANK,” one of the oldest banks in independent Ukraine with more than 11 thousand corporate and 170 thousand private clients, faced the challenge of transitioning from IAS 39 to IFRS 9 in terms of impairment. This transition is a global project encompassing methodology, reporting, processes, data, and IT infrastructure.
SOLUTION
The collaboration between CS company and the bank began in February 2019 with a comprehensive modernization of the bank’s IT landscape, which continued with the implementation of the ProVision solution — a comprehensive software product for impairment assessment in accordance with IFRS 9 requirements, developed by CS together with EY company methodologists.
The product methodology is based on leading global practices for assessing expected credit losses and provides for:
- Scalability and customization capabilities depending on the volume and complexity of the bank’s operations.
- Consideration of methodological approaches historically used by the bank.
- Accounting for the bank’s loan portfolio statistics.
The implemented solution ensures the completion of all stages of expected loss assessment in accordance with IFRS 9 requirements:
- Selection of parameters for significant increase in credit risk.
- Distribution of assets by provisioning “buckets” (stages of asset quality deterioration).
- Assessment of credit risk parameters based on the bank’s historical data and external assessments, with the ability to vary approaches for different asset pools.
- Consideration of forward-looking information and scenario development.
- Calculation of expected credit losses according to collective and individual approaches for all types of financial instruments.
Additionally, the management reporting block allows for analyzing credit risk parameter values, volumes, structure, and dynamics of expected credit losses (ECL).
A distinctive feature of the implementation in PJSC “MTB BANK” was that the process occurred simultaneously with the implementation of CBS B2. Data was loaded into the module from two CBS:
- The bank’s previous system — for loading historical data on assets
- The new CBS B2 — for loading current information on assets
RESULTS
The implementation of ProVision brought significant improvements to the operations of PJSC “MTB BANK.” First and foremost, the bank received a system that fully complies with the requirements and standards of IFRS 9.
The system demonstrated high efficiency in handling large volumes of data. The provision calculation process, which previously required significant time and human resources, now takes an average of 3-6 hours. Additionally, the system maintains a complete history of calculations for all parameters and expected credit losses, enabling prompt responses to audit and regulatory authorities’ inquiries.
An important outcome was the substantial reduction in operational risks. The IFRS 9 methodology involves a large number of calculation operations, and automating this process significantly reduced the likelihood of errors compared to previous calculation methods. An additional advantage was the ability to generate a step-by-step text protocol of the calculation, which simplified the analysis and verification of results by end users.
The bank also received ongoing operational technical support, which is especially important during the monthly assessment of asset impairment, when a quick response to potential technical issues is needed.
