Skip to Content

ICAAP

ICAAP made clear

  • ICAAP governance
  • ICAAP planning
  • ICAAP risk assessment
  • ICAAP risk measurement
  • ICAAP stress testing
  • ICAAP capital planning

Why is ICAAP so important?

Capital is an issue that sits high on the agenda for many financial services organisations. These organisations are exposed to multiple risks in providing their day to day services to customers. ICAAP requirements mean that organisations must have internal procedures and processes in place to ensure that they possess adequate capital resources to cover all material risks over the long term. Ensuring that these requirements accurately reflect risk is essential for managing a profitable and growing business.

 

 

The Prudential Regulation Authority (PRA) has power granted under CRD IV to increase an organisation’s Total Capital Requirement (TCR) where they deem it necessary adding a Pillar 2 variable add-on, Pillar 2 fixed add-on, PRA buffer or Risk Management and Governance Buffer. The tool firms can use to influence this assessment is the Internal Capital Adequacy Assessment Process (ICAAP). The ICAAP helps to ensure that enough capital is held to absorb present and future losses under both regular operating conditions and under stress.

An ICAAP is important for informing the board of an organisation of the ongoing assessment of the bank’s risk, how those risks will be mitigated and how much current and future capital is necessary having considered other mitigating factors. In addition, ICAAP is important for identifying, measuring, aggregating and monitoring an institution’s risks.

What makes an effective ICAAP model?

ICAAP provides an opportunity to show the regulator that you are master of your own risks. However, the challenge is significant and the demands extensive. A weak submission could lead to regulatory concerns over risk management and would likely lead to increased regulatory oversight and possible extra capital requirement ramification. A robust business model, clearly defined risk appetite and strong capital plan are key elements of any ICAAP model. Presenting this in a way that demonstrates the strength of your risk management is crucial.

ICAAP consultancy

Jaywing’s expertise in capital management and regulation, combined with industry leading analytics can take your ICAAP to the next level. We provide an end-to-end service to help you to meet the PRA’s ICAAP requirements.

A successful ICAAP model is most easily achieved by combining internal and external specialist resources. Our consultants will work with you to determine the optimal path for your organisation. We can provide strong oversight and a team with a wide range of skills, including data specialists and modellers with direct experience and a deep understanding of the profit dynamics and sensitivities of your portfolio. We will help you to successfully integrate ICAAP processes into wider risk management activities, looking for opportunities to improve controls and efficiency.

 

Our consultancy services include the following areas, click the links below to find out more:

Explore the sections below to find out more or download one of our free resources to discover the new approaches to common challenges.

0333 370 6600 | [email protected]

Let's talk