One of the largest banks in Romania implements FERNBACH’s IFRS impairment solution

17.08.2015

FERNBACH has expanded its customer base in Eastern Europe by acquiring the second largest bank in Romania.

About the bank

The customer is a universal bank with over 90 years’ trading experience in Romania. As the second largest bank in Romania in terms of assets, one of the main financiers of SMEs, as well as a major player in the corporate banking market in Romania, the bank and its affiliates have over 9,000 employees and over 2.6million customers.

About the project

During a comprehensive tendering process, the bank was convinced by FERNBACH’s impairment solution due to the following scope of properties:

  • Identification of impairment (default) based on qualitative and quantitative measures
  • Impairment test
  • Specific provisions, by calculating the present value of the expected recovery cash flows, using the original effective interest rate and by considering the value of collateral and guarantees
  • Unwinding (interest recognition after impairment) over the remaining life of the deal, using the original effective interest rate
  • Write-off and write-up with or without pre-emptive impairment
  • Portfolio grouping of deals/counterparties with similar credit risk profiles
  • Collective provision per portfolio, by using portfolio-level Probability of Default (PD) and Loss Given Default (LGD)
  • PD and LGD estimation by any method. Multiple methods are delivered off-the-shelf and new ones can be defined, tailor-made to the bank’s requirements.
  • Generation of all relevant debit/credit journal entries for dealing with impairment as described above.

Besides IFRS-compliant accounting, the FlexFinance Impairment Workbench provides a comprehensive workflow-based platform to allow users to intervene in the processing of impairment, enter values manually (e.g. recovery cash flows), monitor impairment events, select the right PD or LGD for a given portfolio, etc.