Lombard Risk merges regulatory products

“Test cases have to frame all the different permutations of how the regulations need to be interpreted,” said Lombard Risk’s James Phillips (pictured left)


James Phillips, Lombard Risk

Lombard Risk, a UK-listed company that develops regulatory reporting software for financial firms, has consolidated its European and Asian and US product platforms into AgileReporter, and also announced an update for new credit risk reporting requirements under Basel III rules.

AgileReporter is designed to automate the submission of reports to regulatory bodies; typically these reports are on capital adequacy, liquidity coverage and other financial statements. It replaces different Lombard Risk regulatory reporting systems used by customers in Europe, Asia and the US.

Lombard Risk has updated the AgileReporter platform to cover SA-CCR, the standardised approach for measuring counterparty credit risk for OTC and exchange-traded derivatives under the Basel Committee for Banking Supervision’s regulatory requirements, which will be in force from January 1, 2017.

Testing for Lombard Risk’s regulatory reporting products requires two distinct workflows, explained James Phillips, regulatory strategy director at the firm. First, test cases for the legal requirements have to be built and, secondly, the algorithms that use these cases also have to to be tested.

The start of the process is the translation of regulatory requirements, written in a natural language such as English, into code. Once this is done Lombard Risk’s QA team creates test cases, test data, and expected results. “Test cases have to frame all the different permutations of how the regulations need to be interpreted,” said Phillips. “These produce complex test cases along with expected results which need to be verified by subject matter experts.”

A typical report by a user to a regulator might require thousands of data points. Each of these might represent a certain asset class exposure of the bank using the platform, cross-referenced to different customers, industries, maturities and so on.

After the test cases are built, the next challenge is to proof the system to ensure it can accommodate changes in legislation. “Our QA team has to maintain the existing body of reporting computations, validations and outputs which do not change, and overlay those with the aspects of regulation that are changing,” said Phillips. “There can also be changing priorities, as many regulatory changes are introduced by regulators at short notice. Add to this that we also deal with multiple jurisdictions in order to provide automation for reporting to many regulators at the same time.”

Changing legal environments require short release cycles and Lombard Risk says it will be updating AgileReporter at least quarterly with upgrades to functionality of the platform interwoven with changes to its validation rules and to XBRL, one of the taxonomies which AgileReporter uses to submit reports.


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