PwC Hong Kong recently received the 'Consulting firm of the year' award at the Asia Risk Awards 2018 in Singapore. The firm's Risk Consulting team, led by Consulting Partner Brian Yiu, has set itself apart by constantly staying on top of new regulations and supporting market participants through implementation and system development. With a team of seasoned financial risk professionals in Hong Kong, the team has developed strong relationships with both regional and international banks that have benefitted from the team's expertise when dealing with a diverse range of new capital and risk requirements.
“Most global regulatory requirements are implemented first in Europe and the US, with the more sophisticated Asian regulators following. So, we are in a good position to help international and regional banks meet these requirements,” says Brian Yiu, Consulting Partner at PwC in Hong Kong.
“The challenge is that banks tend to hire consultants only when they face imminent regulatory requirements and realise that they may not possess enough resources with the right capabilities to get the work done, so deadlines are often very tight.”
Mr. Brian Yiu, Consulting Partner, PwC Hong Kong, receiving the award at Asia Risk awards in Singapore.
Mr. Brian Yiu with Mr. Philip Chan, Consulting Manager, PwC Hong Kong
Among PwC’s recent successes have been its work on the revised standards on interest rate risk in the banking book (IRRBB), issued by the Basel Committee on Banking Supervision in 2016. With the Hong Kong Monetary Authority having set a deadline of 2019 for adoption of the IRRBB, there has been a rush to get to grips with the rules in a short period of time.
The Basel requirements have more comprehensive expectations for a bank’s management of interest rate risk than in the past, including the development of interest rate shock scenarios and behavioural and modelling assumptions, as well as enhanced disclosure requirements and an updated standardised framework. Many banks have never previously had to perform this kind of behavioural modelling and have sought guidance from PwC.
“Our team has some experience in behavioural models and option valuations. We worked very quickly to develop the knowledge and capabilities that were required for an adaptive solution that fits within client architectures. We are currently working with multiple banks of different sizes on IRRBB and are considering several more possible mandates,” says Yiu.
PwC has won business on IRRBB by staying ahead of the regulations, understanding the global and regional standards, and developing its own capabilities early on. This has put the firm in a good position to help banks comply with tight deadlines. Its strength lies also in the fact that its clients comprise both global and regional banks of varying sizes.
“The complexity for banks is that, in Asia, they will often have multiple countries in their portfolio, each with their own particular requirements. We can help clients coordinate different rulebooks, fine-tune models accordingly and explain the requirements and resources needed to senior management,” Yiu explains.
PwC’s risk consultancy is not only about short-term support in understanding and implementing new regulations. Since 2014, it has worked with one of the largest international banks to address the requirements of the comprehensive capital analysis and review (CCAR), a capital planning framework introduced by the US Federal Reserve.
PwC helped the bank design and implement stress-testing and operational processes in more than ten countries, leveraging hundreds of risk models. Its success has been validated by a satisfactory CCAR result in consecutive years. While the project began as a seemingly short-term data collection and cleansing exercise, it has developed into a more complex, long-running project.
“We add value by building long-term relationships with clients and demonstrating our commitment to helping them through these challenges with significant senior level involvement. In many cases, clients will engage us for a short-term project that develops and expands as we identify the root cause of a particular problem and the work that is needed,” says Yiu.