10 Aug 2020

ProVision, a fully integrated software product for impairment assessment in accordance with IFRS 9, has now been successfully implemented in PJSC MTB BANK.
 

Rapidity is crucial and important in business. For CS, as a vendor company, it is important to respond quickly to changing legislation, market trends, and customer requirements. The implementation rates of solutions and the speed of their fulfillment is essential for our clients. 

THE CHALLENGE

The implementation of IFRS 9 requirements has become one of the challenges for the banking sector, and we could not but promptly respond to this issue. The transition from IFRS 39 to IFRS 9 in terms of impairment is a global project which affects not only methodology and reporting but also processes, data, and IT. The solution came as ProVision, a software product for assessing impairment in accordance with IFRS 9, developed in cooperation with the methodologists of the EY Company.

ProVision's methodology is based on the leading international practice of the expected loan losses evaluation. It provides the scalability and the possibility of customization depending on the number and complexity of the bank's operations, and also on the methodological approaches used by the bank historically, as well as accounting for statistics of the bank's loan portfolio. The management reporting module enables to analyze the loan risk's parameters value, volume, structure and dynamics of the expected loan losses (ECL).

ProVision module enables to perform all stages of losses evaluation according to IFRS9 requirements:

• to select parameters of the significant increase of the loan risk;
• to distribute assets into reservation "bins" (by the stages of deterioration of the asset quality);
• to evaluate parameters of the loan risk based on the bank's historical data or external evaluations incl. varying approaches for different pools of assets; 
• to observe the forecasted information and scenario of events course;
• to calculate the expected loan losses according to the collective and individual approach for all types of financial instruments subjected to a reservation.

IMPLEMENTATION IN PJSC MTB BANK

At the moment, ProVision has been successfully implemented and operates both in banks - large market players, and in medium and small banks.
PJSC "MTB BANK" is one of the oldest banks in independent Ukraine, which has celebrated its 26th anniversary in 2019. PJSC "MTB BANK" has a network of five dozen branches in 12 regions of Ukraine, more than 11 thousand corporate and 170 thousand private clients.

The cooperation between the bank an CS Company began in February 2019 with a comprehensive modernization of the bank's IT landscape, which continued with the implementation of the ProVision solution.

The implementation of ProVision module at PJSC MTB BANK took place simultaneously with the implementation of B2 CBS: the module was loaded with data from two core banking systems — the one, which had been used by the bank previously, to load historical data on assets, and the current one, B2 CBS, to download current information on assets. However, we possess the experience of successful implementation of ProVision both in banks that use CBS B2 and in banks that use third-party systems.

The implementation of ProVision allowed PJSC MTB BANK to speed up the calculation of the reserve for active bank operations. The bank also received at its disposal a system that fully complies with the requirements and standards of IFRS  and increases the degree of confidence to the bank's financial statements, which would be favorably perceived by both regulatory authorities, audit and rating companies, as well as bank's partners and business contacts. 

RESULTS AND BENEFITS

We develop our solutions perceiving the aim of simplifying and speeding up the work of a bank at all levels, provide an opportunity to reduce costs, control risks, and perform services with higher quality and convenience. Implementing of ProVision allows the banks to gain the following benefits:

A fast-acting system that demonstrates a high speed of performing complex calculations on large amounts of data so the process of reserves calculating takes 3–6 hours on average. Saving the history of calculations of all parameters and ECL allows to provide an external audit and regulatory authorities with needed data.

Reducing operational risks: the IFRS 9 methodology relates to a large number of settlement transactions and potential operational risks. Automation of the reserves calculating process allows the bank to reduce operational risks in comparison with similar calculations by makeshift tools. 

The ability to customize the system: we offer not just a ready-to-use solution, we are able to fulfill client's needs and are ready to quickly and flexibly adapt methodologies and algorithms to the individual requirements of the bank.

Composing of a custom step-by-step textual calculation protocol which allows using a packaged version as well as create your own, with a custom structure and an arbitrary textual explanatory description of the calculation data - an indispensable functionality for analyzing the calculation results by the end-user.

Support: banks receive immediate technical support for monthly impairment assessments.

PLANS 

We are never satisfied with what has already been accomplished so far, so the company's plans are not to slow down the development of our IT solutions. We are already working on such tasks for ProVision module:

• Integration of ProVision with analytical solutions (primarily the analytical warehouse system CS::BI, CS::BM, and not only) which would provide additional degrees of freedom in analyzing the bank's exposure to credit risk, factors, and the profile of expected credit losses, identifying concentration points credit risk in assets aggregate portfolio. Improves enterprise-wide risk management processes both directly in the analytical aspect and in increased risk awareness when making day-to-day and strategic management decisions.
• Further improvement of integrity, confidentiality, and security (hierarchy of access rights, validation of calculations, and control over invalid actions) will reduce the operational risks of everyday use of ProVision, arising from unintentional errors, potential malicious actions, equipment failures, etc.;
• Transferring the solution into Angular as a modern, dynamically developing framework, that will provide an increase in performance and reliability of the solution, modernization of the interface, and the technologies.
• Using ProVision online via Cloud Services provides banks with an alternative and fundamentally new pattern of using the product in its packaged methodological implementation without the need to deploy it at the bank's capacities, which is extremely convenient for one-time/irregular use (with payment on the fact of settlements) or for a preliminary acquaintance with the system in order to make a decision on further implementation.