Reuters Kondor Global Risk – Basel II Reporting and Limit Solution

The Basel Committee on Banking Supervision has been For Basel II, Kondor Global Risk will cover the most critical regulatory demands in working for several years to develop a new regulatory calculating and reporting capital adequacy capital framework that recognises the increasing complexity for credit risk including the requirements of effective risk management. Through a three pillar under the three pillars on the following page: approach, the new Basel framework responds to dynamic new developments in financial products, the evolution of Trading in financial securities inevitably management practices and advances in risk measurement. carries a variety of risks. Accepting these risks exist, pre-empting them and responding to/mitigating them immediately is a goal of every financial institution – and the ultimate objective Basel II of the Basel II Accord. Reuters Kondor Global Risk consolidates credit limit information and manages the data in real-time across all instrument types. It provides credit and risk managers with the control and PILLAR 1 PILLAR 2 PILLAR 3 monitoring of credit exposures, enabling efficient limit utilisation across the Minimum Supervisory Market enterprise. The latest release (version 3.0) Capital Review Discipline provides a robust infrastructure for Basel II Requirements Process compliance and has been specifically designed to meet the demands laid out Calculation - Adequate Disclosure of in the revised framework issued by the of Three Risk Capital Risks and Risk Basel Committee on Banking Supervision types: - Sound Practices in June 2004. - Market supervisory - Credit review - Operational practices - Improvement of Risk Management Techniques Reuters Kondor Global Risk – Basel II Reporting and Limit Solution

Pillar I Pillar III Reporting The regulatory capital report displays the To meet pillar I requirements, Kondor Global The minimum capital requirements (Pillar I) regulatory capital charge for each exposure. Risk calculates capital adequacy for and the supervisory review process (Pillar II) Results can be analysed across many exposure to credit risk. It covers the different are reinforced by transparency requirements dimensions – for example by customers methodologies for determining capital (Pillar III). Kondor Global Risk provides (counterparties), instruments, asset class etc. requirements, provided by the Basel the additional information required for The regulatory capital report also highlights Committee: the standard approach, the disclosure of credit risk under Pillar III. the impact of credit mitigation on exposure foundation IRB (Internal Ratings-Based) and capital charges. approach and the advanced IRB approach. The implementation of Basel II formulae Kondor Global Risk also implements the full Capital Limits: limits on the In order to simplify implementation and to methodologies for credit risk mitigation calculation of Capital Requirements enable compliance, all Basel II formulae are techniques such as eligible collateral, on- predefined – and flexibility is ensured as Through the use of capital management balance sheet netting agreements, users are able to define their own calculation as a critical key success factor in the guarantees and credit derivatives. methods via user friendly procedures. management of operational activities, banks - Within the standard approach, Kondor are able to leverage resources to maximum Global Risk uses external ratings provided A tool to evaluate the Probability effect. Capital limits in Kondor Global Risk by international rating agencies, in of Default enables proactive control over the levels of capital consumption ensuring the ability to determining the risk weights and the By grouping customers (counterparties) in track and manage these limits and take capital charge for credit risk. annual buckets, users can process this data corrective actions when needed. The application can handle both the to take into account rating migration, simple and the comprehensive defaults, new and drop out borrowers. As Kondor Global Risk has been designed approaches. Users will be able to adjust rating histories retrieve all ratings at any to provide the strong risk management the value of collateral using haircuts to specific date, pools will also be stored on analytics, processes and disclosure that are account for fluctuations in future market. an annual basis for predicting on-going required through Basel II and so provides rating migration. a valuable platform for compliance. - Within the IRB approach Kondor Global Risk meets the demand for calculating capital charge – including the estimation KGR - Basel II, Reporting and Limit Solution and calculation of the risk parameters probability of default (PD), loss given Limit Management Calculation Risk Parameters PD, LGD, EAD default (LGD) and exposure at default Capital + Granularity Limit. Customer + Transaction Limit (Average) Cumulative PD Effective LGD (EAD). These are implemented into the risk weight formula for both the foundation and the advanced IRB approach.

Pillar II To satisfy pillar II Kondor Global Risk facilitates the testing of capital adequacy KONDOR GLOBAL RISK and risk parameters through stress and Basel II Reporting Calculation Capital Adequacy Basel II back tests supported by a standard set Capital Adequacy + Pillar 2 Standard Approach Internal Rating Based of reports. Cap.Req.= EAD * RW Cap.Req. = EAD * RW

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