Cloud-based Services Allow Japanese Banks to Prepare and Report New IFRS Requirements
FINCAD, a pioneer in providing pricing, modeling, and risk analytics, today announced it has launched a new cloud-based service, enabling Japanese financial institutions to evaluate, account for and report credit valuation adjustments (CVA) and debit value adjustments (DVA) to meet Japanese accounting standards, which become effective April 2021 with first reporting due in June 2021.
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Utilizing FINCAD’s next-generation analytics, FINCAD CVA Services will allow Japanese banks of any size and complexity of portfolios to perform the required valuation adjustment calculations for their derivatives trades. Now banks can easily evaluate if they need to report CVA and provide accurate reports as needed to meet regulatory requirements.
Financial institutions engaged in derivative or securities financing transactions are exposed to the risk of incurring mark-to-market losses due to erosion in the creditworthiness of their counterparties. In the Basel III framework, these potential losses due to changes in counterparty credit spreads or other market risk factors are often referred to as CVA Risk.
Managing and reporting CVA is not trivial and involves complex calculations and running scenarios thousands of times over. Mark D’Arcy, President and CEO of FINCAD shares, “Combining FINCAD’s world-class valuation and analytics with native cloud technology offers the industry a sophisticated analytics utility that is operationally resilient, horizontally scalable and cost effective. In partnership with Techmatrix, we are thrilled we are able to tailor this capability to meet the business needs of our Japanese customers, some of whom have complex portfolios. As a Fintech cloud company, CVA is just one of many cloud services FINCAD is able to offer our customers.”
Launched in 2020, the FINCAD CVA Service will begin assisting several Japanese banks from April 2021. The service includes:
- An Estimation service to evaluate if a bank must report CVA at all.
- An Accounting service that will calculate CVA on an ongoing basis.
- Ongoing measurement of expected exposure to the volatility of the market.
- Consulting services provided by Techmatrix, FINCAD’s local Japanese partner well versed with servicing Japanese financial institutions for over (15) years.
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