ABC Innovative Platform Helps Improve Economic Capital Management
OREANDA-NEWS. May 23,
It's reported that the Platform combines the successful practices in economic capital measurement, funds transfer pricing and management accounting. Taking into consideration business development strategies, operators can reasonably simulate multi-dimensional operation scenes such as business plan, financial budget, business strategy and risk control. By setting indicators, limits and parameters by themselves, they can generate economic capital allocation proposals under various management dimensions in a real-time manner, constantly optimize business, region and product portfolio allocation, and improve economic capital return and economic value added, to win necessary economic capital resources for development.
According to an officer from ABC, the promotion and application of the Platform will accelerate the implementation of the regulatory requirements on "establishing sound mechanisms on internal capital adequacy assessment and capital planning and allocation within banks" in the Pillar II of Basel New Capital Accord. Meanwhile, the Platform will provide a new management support tool for branches to transform growth mode, deepen internal management reform and raise value return, as well as improve ABC's capability in management, decision-making, analysis and data processing of economic capital.
As introduced, the Platform pre-configured optimization windows for economic capital allocation under various dimensions such as product, region and customer, and the pilot run is focused on product optimized allocation. According to test result, under constant business volume and financial status, optimized allocation of product portfolios alone can save RMB620 million of economic capital, increase benefit-generating economic capital by RMB130 million, and improve economic capital return by 1 percentage point.
Next, ABC will further improve and deepen the platform application by extending the pilot run to eight branches, so as to explore the way to achieve "optimized economic capital return + maximum economic value added" and optimal balance between risk and value.
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