1. Risk and Capital Management Solution Delivery
Economic Capital Process & System

2. 2
Enterprise Risk Management (ERM) Framework
Efficiency in Leverage & Liquidity:
 Efficiently Manage Leverage as it
Pertains to ALM and Trading Book
 Efficiently Manage Asset & Funding
Liquidity
 Protect Bank’s Solvency
Improved Risk Awareness:
 Know your Risk and Plan Ahead
 Timely Identification of Portfolio
Volatility & Proactive Decision Making
Successful
Return
Capital &
Loss Reserve
Portfolio
Risk
Jointly Chaired
by
Risk & Finance
Optimize Capital Allocation:
 Link Risk to Capital (Expected and
Unexpected Losses based on risk
drivers)
 Set Capital Target based on solvency
rate
 Define Risk Appetite and Limits
 Adequacy in Capital in Relation to
Bank’s Overall Risk Profile
 Comprehensive Pricing System that
Covers Expected Losses
 Effective Downturn Treatment
(PIT/TTC Risk parameters & stress
based factors)
Maximize Risk-Return:
 Proactive Measurement of Exposure
Quality
 Proactive Measurement of Exposure
Concentration
 Be Able to Forecast Losses and
Earning at Risk
 Shareholders Value-Add
 Hold good Risk Adjusted Return
on Capital (RAROC) and SVA
 Hold good Economic Profit/EVA,
ROA, ROE, IRR etc.
Competitive Advantage
and Level-Playing Field:
 Build Goodwill & Reputation as Strong
Capitalized & Asset holding Bank (Good
value-proposition for Investors)
 Stay Current on Demanding Regulatory
Response (SEC, FFIEC, FDIC, FASB, OCC,
FED, BASEL/NPR, Dodd-Frank etc.)
Recognize Risk Appetite and Reward Stakeholders:
 Clear Understanding of Bottom-UP Risk Assumed in
Portfolio
 Tailor Risk for Business to Develop Top-Down
Classification that is Transparent to External
Stakeholders
 Articulation of Risk Attributes for Senior
Management
Must be built on a strong data and analytics foundation with continuous measurement and optimization than establishing
empirical goals based on general or indicative market trends.

3. 3
Capital management framework

4. 4
Risk Appetite & Limits – Capital Management Process
Governance
Business
Processes
Measures
Committee Structure Roles and Responsibilities Policies and Documentation
Board Level Risk and Capital
Committee (RCC)
• Business
• Risk
• Finance
• Treasury
• Internal Audit
• ICAAP Policy and Manual
• Risk Appetite Statement
• Contingency Plans
• Methodology Documents
• Model Validation GuidelinesRisk
Committee
Risk & Capital
Committee
Planning Execution Evaluation
Risk Appetite Setting
Strategic Planning
Capital Planning and
Budgeting
New Product /
Business / M&A
Initiatives
Capital Adequacy
Assessment
Risk-Adjusted
Performance Review
Incentives
ICAAP Reporting and
Disclosure
Business Execution (Service Offering,
Pricing, Client Portfolio Management)
Risk Identification,
Measurement and
Monitoring
Financial
Assessment and
Forecasting
Capital
Management
Contingency
Planning
Liquidity
Management
Contingency
Planning
Risk Inventory
Economic and Regulatory Capital
Capital
Measures
Risk Adjusted
Performance
MeasuresStress Testing and Scenario Analysis
Allowance /Other Credit Risk
ValidationandAssurance
Well-designed capital management programs include governance, business processes and measures based on
lessons learned and regulatory requirements.

5. 5
The Total Risk has to be Matched by Different Layers for
Risk Taking Capacity

6. 6
Credit Risk ECAP Calculation Engine -- Illustrative
A sound economic capital model and system must be built on a strong data and analytics foundation with continuous
measurement and optimization depending on risk profile and target rating than establishing empirical goals based on general
or indicative market trends. The Total Risk has to be matched by different layers for Risk Taking Capacity.

7. 7
Risk , Return & Capital Management Building Blocks
Develop Risk Appetite and Risk Taking Capacity with deep learning from your own portfolio data , risk drivers, model results and
performance metrics. We will assist banks building out the capability pyramid driving from strategy through implementation.
Risk Appetite
Risk Capacity
Target Risk Profile
Optimize risk and return
Measures RAP & RBP
Risk & Finance Data Provisioning Process & Workflow
Focused Portfolio Reporting and Analysis on Credit Quality
and Concentrations, Which Drills Down to Risk Drivers
Allocate Economic Capital
Linking to Risk
Proactive Use of Traditional Risk Mgmt Methods
Limits, Approvals Standards, Asses Risk Drivers
Model Development, Validation & Model Risk Management
(Rating Models, Loss Models, Risk & Economic / Regulatory Capital Models)
IRR
Interest Rate
IRR
Group
IRR
Liquidity
OR
Operational
MR
Market
CR
Credit
BR
Business
Actual Risk Profile
Risk / Finance Dimensions
TBE – Group Concentration
Industry
Geography
Product
Collateral
Tenor / Maturity NIACC
RAROC
Capital Allocation
LOB
CIB Comm Consumer
North-East $$ $$ $$
Central $$ $$ $$
Mid-West $$ $$ $$
South-East $$ $$ $$
South-West $$ $$ $$
Total $$ $$ $$
Geography
“Portfolio Risk
Reporting” “Measure Performance /
Maximize NIACC”
Portfolio Management Committee
Jointly Chaired by Risk & Finance
Bottom-Up
Top-Down
“Optimize Risk /
Return”
“Allocate Economic
Capital”

8. 8
Building Blocks for an Economic Capital System

9. 9
Identification & Quantification of Risk – Risk Aggregation

10. 10
Industry Practices to Address Economic Capital Allocation
Methodology

11. 11
Economic Capital Allocation Methodology Comparison

12. 12
ICAAP Framework – Business Impacts, Scenario Analysis,
Risk Identification & Planning
 How an economic downturn would affect
 the firm's capital resources and future earnings;
and
 the firm’s CRR taking into account future changes
in its projected balance sheet.
 The institution’s “baseline” capital forecasts (at least
quarterly, based on its annual business plan)
 A 3-year summary forecast capital position and a
description of the institution’s capital planning and
management process, including an outline of how ICAAP
is incorporated into this process.
Forward Looking Planning & Assessment