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Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. Todays Regulatory Landscape: Complying with Multiple Regulations Simultaneously Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. Copyright 2016 by S&P Global Market Intelligence. All rights reserved. Hans Crockett Vice President Innovation and Thought Leadership Global Risk Services Munich, May 10th, 2016 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. Overview The global regulatory landscape and regulatory convergence Regulatory reporting: Common data challenges Risk-focused regulations: Overview of Basel III, Solvency II, and IFRS 9 Staying up-to-date with regulatory developments Appendix: Relevant S&P Global Market Intelligence offerings 2 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. The Global Regulatory Landscape And Regulatory Convergence 3 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. A Sea Of Acronyms And Expressions EMIR CVA FINREP COREP MIFID II RWA CCP CRD IV CCAR UCITS MAR MAD FASB AIFMD MIFIR SIFI "Regulatory Arbitrage" "Substituted Compliance" Solvency II Basel II & III IFRS FATCA 4 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. Conscious efforts of the G20, FSB, CESR, EBA-ESMA-EIOPA, BCBS, IAIS etc., Main themes: Risk-based capital, stress testing, credit risk assessments, transparency, independent multifactor pricing, macroeconomic scenarios, provisions, liquidity management Risk-based capital adequacy and reporting Basel, Solvency II, IORP II, CCAR, Swiss Solvency Test for Insurers Scenarios and stress testing Basel, CCAR, DFAST, Solvency II (Pillar 2 / ORSA), AIFMD, UCITS IV/V, IFRS 9 Systematic credit quality assessments Basel, Solvency II, IORP II, AIFMD, IFRS, CRA3 Credit-sensitive valuations IFRS 13, Basel, Solvency II Provisions against expected losses IFRS 9, FASBs CECL Global Regulatory Convergence (1) Regulatory Backdrop 5 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. Measuring and managing liquidity AIFMD, UCITS IV/V, Basel (LCR, NSFR), 40 Act Electronification, OTC derivatives trading and transaction reporting Dodd-Frank Title VII, EMIR, MiFIR/MiFID II Transparency and reporting (to regulators and to investors) EMIR, Dodd-Frank, MiFID II, Solvency II, Basel III Data quality and governance BCBS 239, Solvency II Equivalence / cross-border harmonisation EMIR / Dodd-Frank, MiFID II, Solvency II, tax disclosure, and data sharing e.g., FATCA, OECD tax data sharing Global Regulatory Convergence (2) Regulatory Backdrop 6 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. Global banking regulation Basel II (including ICAAP), III, IV (soon) and regional implementations (e.g., CRD IV in the EU); DFAST, CCAR, EBA stress testing and structure of banking operations, Swiss too big to fail regime General themes: Risk-based capital, scenarios and stress testing, funding provisions, liquidity provisions, data governance Global OTC derivatives reform EMIR, Dodd-Frank Title VII and national derivative trading, trade reporting and clearing regimes General themes: Transparency, electronification, central clearing, collateralisation and margining Global insurance regulation EUs Solvency II, Chinas C-ROSS, South Africas SAM, Australias Prudential Standards, Swiss solvency test General themes: Risk-based capital requirements, internal governance and supervision, data governance, reporting Accounting standards IFRS 9, IFRS 13, FASBs CECL General themes: Credit-sensitive valuation of derivatives, provisions against credit impairment, asset classifications Families Of Regulation (1) Regulatory Backdrop 7 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. Fund-centric regulation (hedge funds and mutual funds) AIFMD, UCITS, 40 Act, PRIIPS General themes: Risk management, governance, disclosures and reporting, liquidity Global trading environment MiFID II/MiFIR, Volcker Rule, MAD General themes: Electronification (including centralised platforms), transparency, reporting Global tax rules and tax transparency US FATCA, OECD Automatic Exchange of Information, BEPS General themes: Sharing of tax position details between governments and jurisdictions, elimination of double non-taxation Investor protection rules AIFMD, UCITS, PRIIPS, 40 Act, local regulator/supervisor rules General themes: Transparency, marketing and periodic reporting Families Of Regulation (2) Regulatory Backdrop 8 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. Regulatory Reporting: Common Data Challenges 9 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. New types of data required Much needs to be sourced externally from multiple parties (asset managers, vendors, fund administrators, custodians, regulators etc.,) Vast quantities of data required Challenges with data ingestion, storage, linking and aggregation Detailed investment/asset data requirements for all three pillars Emphasis on data quality, transparency and traceability Look-through carries specific challenges: availability, timeliness, cost Requirements for robust data management processes and consistent use of data Different approaches, choices and results are possible for certain required data elements e.g., asset classifications, CQS, ultimate parents, industry sectors, prices, credit scores, PDs etc., Common Data Challenges (1) Global Regulation 10 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. Licensing and redistribution issues for certain data types (e.g., credit ratings, evaluated pricing, CUSIPs) Where some data is free/in the public domain, there can be misconceptions Credit ratings IP, instrument identifier IP, consultation vs databasing, challenges gathering and maintaining data up-to-date, challenges mapping to correct entities and securities Managements decisions are impacted by data and how these change Credit ratings, classifications, ownership/corporate hierarchies, pricing availability Common Data Challenges (2) Global Regulation 11 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. Basel III 12 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. Basel Regulation began in 1988 and has continued to evolve: BASEL I (1988): Defined Tier 1 and Tier 2 capital, introduced risk-weighted assets and the solvency ratio. Focused mainly on credit risk (risk-weighted approach); market risk (VaR) model introduced in 1996 BASEL II (2006): Introduced the 3-Pillar approach: Capital requirements, supervisory review and market discipline. Major changes related to credit risk (Internal Ratings-Based Approach, IRB) and counterparty risk on OTC derivatives (potential future exposure, IRB approach) BASEL 2.5 (2009): Revision of Basel II norms. Introduced stressed VaR, the Incremental Risk Charge [IRC] to capture default and credit migration risk, and the Comprehensive Risk Measure [CRM] to capture correlation risk. Introduced standardised charges for securitisations BASEL III (2010-11): Introduced multiple new components, including the addition of CVA for counterparty risk BASEL IV (2013): A Fundamental Review of the Trading Book (FRTB) has been proposed. However, it will be at least five years before this is implemented Today, Basel II rules are effectively still in place for the banking book (via the Standardised and IRB approaches), while Basel 2.5 and III are replacing capital requirements for the trading book and OTC Derivatives Overview Of Basel Regulation: From 1988 To Today 13 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. The three Pillars of the existing Basel II framework remain largely in place Basel III aim to strengthen bank capital requirements by increasing the quality and quantity of required capital, and also by increasing liquidity and decreasing leverage Basel III introduces several important new elements Minimum Common Equity Tier 1 (CET1) ratio to be maintained at all times Additional Tier 1 (AT1) ratio Capital Conservation Buffer Countercyclical Capital Buffer Two required Liquidity Ratios: a Liquidity Coverage Ratio (LCR) and a Net Stable Funding Ratio (NSFR) A minimum Leverage Ratio Trading Book Capital Requirements (Basel 2.5) Additional requirements for Systemically Important Banks (SIBs) OTC Derivatives: CVA for counterparty risk Basel 2.5 And III: Key Elements Of The New Framework 14 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. The CRD IV package transposes the new global standards on bank capital (commonly known as the Basel III agreement) into the EU legal framework via a regulation and a directive that entered into force on July 17th, 2013 Banks started reporting under the new framework in January 1st, 2014. However, some of the new provisions are being phased out to 2019 The European Banking Authority (EBA) plays a key role in the implementation of the new Basel regulatory framework in the European Union. Particularly, the EBA is now mandated to produce a number of Binding Technical Standards (BTS), guidelines and reports for the implementation of the CRD IV package In Europe Basel III will apply to all banks more than 8,300 institutions When Will Basel III Be Implemented In Europe? 15 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. The Basel Committee on Banking Supervision (2013) proposed a set of data-related principles aimed at strengthening significantly risk management capabilities across the banking sector: Governance and infrastructure Governance Data Architecture and IT Infrastructure Risk data aggregation Accuracy and integrity Completeness Timeliness Adaptability Risk reporting Accuracy Comprehensiveness Clarity Frequency Distribution Supervisory review, tools and cooperation These broad principles can readily be extended to any kind of firms Source: BCBS (January 2013). BCBS 239 The Basel Committee Risk Data Principles 16 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. Solvency II 17 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. EU Directive designed to unify the EU insurance market, enhance consumer protection, reduce risks of insolvency, improve the competitiveness of EU insurers and provide regulators with an improved view of systemic risks Introduced a new, harmonised EU-wide insurance regulatory regime, replacing 14 existing EU insurance directives Regulates the amount of capital that EU insurance companies must hold to reduce the risk of insolvency. Also regulates governance and risk management processes. Encompasses all insurance and reinsurance firms with gross premium income exceeding 5m or gross technical provisions in excess of 25m within the EU and their subsidiaries outside of the EU. Also applies to European subsidiaries of global insurance companies. EIOPA (the European Insurance and Occupational Pensions Authority) issues Solvency II guidelines and recommendations and developed draft regulatory and implementing technical standards Came into effect on January 1st, 2016 What Is Solvency II? 18 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. Insurers must hold capital against a range of risks, not just insurance risks Insurers are required to identify, measure and proactively manage risks; all risks and their interactions must be considered Supervisory review process Greater public disclosure and reporting to regulators (QRTs, FSR, SFCR, ORSA, and National Specific Templates) 2016 reporting timelines: Insurers with December 31st, year-ends must file their first quarterly reports by May 26th, 2016 The first annual reports are due May 20th, 2016 (based on 2015 data) Reporting deadlines in the first year are longer and then reduce every year for three years. Some smaller firms can apply for certain reporting exemptions. What Does Solvency II Involve? 19 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. Solvency II compliance requires a wide range of information, from instrument and entity reference data to pricing data, funds look-through, and security ratings Each Solvency II pillar involves specific data requirements: Data requirements can broadly be grouped into five categories: 1. Identifiers: Security codes, counterparty and issuer identifiers, fund IDs, etc. 2. Entity and Instrument Characteristics: External ratings, durations, LGDs, etc. 3. Categorisations: CIC Codes, industry sectors, asset categories, collateral type, etc. 4. Transaction data: Trade date, gains/losses, premium paid/received, etc. 5. Position data: Quantity, notional amount, accrued interest, etc. Solvency II Data Requirements Pillar 1 Capital Requirements Requires asset and liabilities data, reference data, issuer data, credit-related data and pricing/valuations data Pillar 2 Governance and Supervision Requires data consistency, auditability, transparency and history Pillar 3 Transparency and Reporting Requires high-quality multi-asset class and entity-level data 20 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. Solvency II And The Data Quality Challenge The data reported needs to be not only accurate, but also consistent with that used by insurers for their Solvency Capital Requirement (SCR) and Minimum Capital Requirement (MCR) calculations Solvency II requires asset data to be complete, accurate and appropriate; data quality assurance processes will be monitored by insurers and their supervisors Data has to meet the same quality standards irrespective of whether it is sourced internally or externally. Insurers will want to be sure that the data obtained from their asset managers, fund administrators and data vendors meets the required standards Data consistency may be challenging to achieve because different market data sources can return different values for the same data field (although each can be accurate in its own way) 21 Source:CEIOPS Advice for Level 2 Implementing Measures on Solvency II: Technical Provisions Article 86 f, Standards for Data Quality, CEIOPS, October 2009. Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. IFRS 9 22 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. Overview of IFRS 9 IFRS 9 is a new accounting standard (replacing IAS 39) that will apply throughout approximately 100 countries, including across the EU The goal is for institutions to set aside sufficient provisions to deal with potential future credit losses From January 1st, 2018, IFRS 9 will require banks and listed companies to measure credit loss impairment based on a forward-looking Expected Credit Loss (ECL) approach. These will be recorded in their P&L as loss provisions IFRS 9 will have a significant impact on financial statements the greatest impact will be from credit impairment calculations (expected to increase provisions by >40% compared to IAS 39). Financial institutions in particular will be significantly impacted IFRS 9 will have an impact on regulatory capital, potentially leading to a need to raise equity A vast number of institutions are currently unprepared for these new requirements 23 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. IFRS 9 Requirements Institutions will need to monitor changes in credit quality and to calculate specific forward-looking credit risk measures (Point-in-Time PDs and LGDs) These measures will need to be calculated for two key time horizons: Over the next twelve months and over the lifetime of instruments, depending on how instruments are classified into performing, underperforming or non-performing This will lead to the following needs: The ability to monitor credit quality on an ongoing basis Sourcing historical default information and other data required for credit quality assessments The ability to simulate realistic forward-looking scenarios Integrating the use of new data, models and analytics into accounting processes Large banks are likely already to have the required data, models and systems in place, though not necessarily the required methodologies or analytics In the US, the Financial Accounting Standards Board (FASB) is currently developing a similar proposal to require the calculation of Current Expected Credit Losses (CECL) under US GAAP accounting rules 24 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. Issues For Banks Implementing IFRS 9 Banks will need to adjust their Basel Internal Ratings-Based Models to comply with IFRS 9. There are a number of differences between the two modelling approaches: IFRS 9 Point-In-Time (PiT) PDs vs Basel IRB Through-The-Cycle (TTC) PDs 1-year PDs under Basel vs 1-year and multi-year PDs under IFRS 9 Point-In-Time LGDs under IFRS 9 vs downturn LGDs under Basel Migration risk needs to be explicitly monitored and modelled under IFRS 9; migration risk in Basel can be proxied by residual maturity in the IRB formula IFRS 9 specifies a 30-day past due trigger for loans and trade receivables to move to the underperforming category Under IFRS 9, macroeconomic forecasts for PD purposes will include both positive and negative scenarios, whereas for Basel Stress Testing, only worst-case macroeconomic scenarios are considered Under IFRS 9, the calculation of PDs and LGDs is required for all exposures, irrespective of the regulatory credit modelling approach (Standardised or Internal) 25 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. Interactions Between Regulations Addressing multiple regulations simultaneously will require robust data infrastructures that provide transparent and auditable outputs. Associated technology costs are likely to increase Common data requirements exist across multiple regulations (e.g., LEIs and independent valuations across Solvency II, EMIR, CRD IV, AIFMD, Dodd-Frank Title VII etc.,) Basel III and Solvency II both alter the preferred mix of bonds, including asset-backed bonds IFRS 9 and CECL Credit Impairment provisions interact with Basel requirements EMIR will require highly-quality collateral (e.g., cash and highly-rated bonds) AIFMD, CRD IV, Dodd-Frank and Solvency II set similar conditions on retained ownership of securitised instruments MiFID II, Dodd-Frank Title VII and EMIR will lead to new independent sources of pricing for certain instruments (including specific OTCs) Strong interactions between Insurers and the Fund Management industry, favouring transparent funds that are UCITS and AIFMD compliant CRA3 has implications on credit quality assessment methods throughout all types of institutions that use credit ratings, including the fund management industry 26 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. Staying Up-To-Date With Regulatory Developments 27 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. Staying On Top Of Regulatory Developments Source: www.snl.com. 28 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. Regulatory News Commentary 29 Source: www.snl.com. Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. Regulatory Profiles For Selected Markets 30 Source: www.snl.com. Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. Appendix: Relevant S&P Global Market Intelligence Offerings 31 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. Asset and Entity Classifications and Identification Codes: multiple security and entity identification and classification schemes are in use. Clients need to be able to quickly map between these for consistency and to analyse concentration risk. Ultimate Parent, Parent and Subsidiary Relationships: very complex relationships can exist. In order to asses concentration risks, these relationships need to be mapped and understood. S&P Global Market Intelligences Solution: Cross Reference Services Our Business Entity Cross Reference Services link multiple entity identification schemes and help identify Ultimate Parents Our Global Instrument Cross Reference Services link multiple security identification and classification schemes Our Industry Sector Cross Reference Services provide multiple entity classification schemes Our Company Relationships package helps identify and map complex corporate relationships Reference Data 32 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. Credit Ratings: referenced for investment assets and used to calculate capital requirements (under the Basel and Solvency II Standard Approach/Formula). Credit Risk Analytics: proven methodologies and tools to score and track credit health and risk across both rated and unrated investments (relevant for Internal Models). S&P Global Market Intelligences Solution: Credit Ratings, Indicators and Models Standard & Poors Credit Ratings: We are the official source for access to credit ratings and research from Standard & Poors Global Ratings We also offer credit ratings from other ratings agencies, which can be delivered through a single feed alongside Standard & Poors Global Ratings Credit analytics: We offer robust credit models to help score, track and benchmark credit risk across both rated and unrated investments. In addition to models that calculate Probabilities of Default (PD), we offer an extensive historical database of actual default rates, ratings transitions, recovery rates, and Loss Given Default (LGD). Internal ratings methodologies: Our credit assessment scorecards deliver a fully documented and transparent credit scoring process; outputs are mapped to the Standard & Poors credit ratings scale Independent model validation: Our validation services can be used to test the efficacy, soundness and performance of your credit risk models rigorously and consistently Credit Risk Offerings 33 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. Credit Models Expert Judgment Quantitative Fundamentals-Based Models Quantitative Market Signals Models Public Ratings Scoring Template (Fundamental) Scoring Model (Fundamental) Probability of Default (Fundamental) Peer Analysis Model Market Signals CDS spreads Market Signals Stock Price (Volatility & Returns) Product Standard & Poors Ratings Services Scorecards CreditModel PD Model Fundamentals Credit Health Panel Market Derived Signals (MDS)* PD Model Market Signals Primary MeasureCredit ratings* Credit Score - Mapped to bucketed PD percentage Credit Score - Mapped to bucketed PD percentage Continuous PD percentage - Mapped to credit score Relative score Custom score Credit Score - Mapped to PD percentage PD percentage - Mapped to credit score DesignAnalyst, committee driven & credit methodology driven Segment-focus expert judgment modeling Calibrated on ratings Segment-focus quantitative modeling Calibrated on ratings Segment-focus quantitative modeling Calibrated on empirical defaults Fundamental-based scores and ratios for peer group assessment Market derived signals based on credit default swaps Calibrated on empirical defaults Market derived signals based on stock price volatility and returns Calibrated on empirical defaults DNA Medium/Long-term Medium/Long-term Medium/Long-term Medium-term Medium-term Short-term (Point-in-time) Short-term (Point-in-time) Coverage Global Coverage Daily monitored 6k companies Global Coverage No pre-scores Global Coverage Weekly pre-scored 36k+ companies Global Coverage Weekly pre-scored 370k+ companies Global Coverage Daily pre-scored 210k companies Rated Companies w/ CDS coverage Daily pre-scored >1k companies Listed Companies Daily pre-scored 38k companies InputsRigorous analysis of any relevant qualitative and quantitative inputs Qualitative and quantitative inputs Country risk Industry risk Economic risk Sovereign risk Financial statements + quantifiable inputs Country risk Industry risk Economic risk Sovereign risk Financial statements + quantifiable inputs Country risk Industry risk Economic risk Sovereign risk Financial Statements Operational Solvency Liquidity CDS spreads Industry risk Economic risk Sovereign risk Equity, Financials Country risk Industry risk Economic risk Sovereign risk *From Standard & Poors Global Ratings. S&P Global Market Intelligence, as well as its products and services are analytically and editorially separate and independent from other analytical areas at S&P, including S&P Global Ratings. For illustrative purposes only. 34 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. Credit And Market Risk Assessments S&P Global Market Intelligence deliver key data and analytics which help banks comply with requirements related to credit and market risk on multi-asset classes. For trading books, market risk data is required to estimate volatility and VaR-based risk statistics For Banking books, historical fundamental data, estimates, ratings, and probability of default models are required to comply with the Internal Ratings-Based (IRB) approach and the new IFRS 9 accounting principle Credit default swap spreads are needed to calculate the new Credit Value Adjustment (CVA) capital charge formulas for ITC derivatives Credit And Market Risk Assessments Ratings Credit Analytics and PD and LGD Credit Assessment Scorecards Fundamental Data Credit ratings Credit research Low latency ratings alerts Ratings press releases Default, transition and recovery data PD Model Fundamental for public and private companies CreditModel 2.6 PD Model Market Signals (equity-based) CDS-based signals for entities PD and LGD credit Assessment Scorecards for low-default portfolios Standardised global company data Extended global fundamentals Ratings fundamentals (CreditStats Direct) Industry sector classifications Internal Ratings Development 35 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. LEI: Legal Entity identifier used to identify counterparties, issuers and ultimate parent entities (to monitor concentration risk) - S&P Global Market Intelligences Business Entity Cross Reference Service includes LEI codes and mappings to ultimate parent entities NACE: European Standard Industry Classification - S&P Global Market Intelligences Industry Sector Cross-Referencing Services offerings include multiple standard industry classification schemes (e.g., NACE and GICS) CIC: Complementary Identification Code for asset classification - S&P Global Market Intelligences offerings also include core data required to construct CIC codes (whose determination can involve subjective elements) Instrument characteristics and risk-related metrics including multi-level pricing and valuations data, security terms & conditions, instrument identifier cross reference services, and Duration metrics Credit Risk measures and indicators including S&P Ratings, external ratings (from multiple ratings agencies), Credit Models, Scorecards, Loss Given Default (LGD) measures, historical default statistics, Probabilities of Default (PDs), Ratings transition matrices, and market-derived signals Other relevant S&P Global Market Intelligences offerings include transparency measures, corporate actions, company fundamentals, and yield curves Solvency II Specific Examples 36 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. http://www.spcapitaliq.com/client-solutions/regulatory-solutions Engaging The Market On Timely Regulatory Issues Ongoing Market Interaction Supporting The Development Of Regulatory Solutions Source: www.spcapitaliq.com. 37 http://www.spcapitaliq.com/client-solutions/regulatory-solutionshttp://www.spcapitaliq.com/client-solutions/regulatory-solutionshttp://www.spcapitaliq.com/client-solutions/regulatory-solutionshttp://www.spcapitaliq.com/client-solutions/regulatory-solutionshttp://www.spcapitaliq.com/client-solutions/regulatory-solutionshttp://www.spcapitaliq.com/client-solutions/regulatory-solutionshttp://www.spcapitaliq.com/client-solutions/regulatory-solutionsPermission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. Attractive Standard & Poors credit rating universe, from the source Credit Models and Credit Analytics trained on extensive data and Standard & Poors methodologies We are originators for significant datasets Data available on multiple feeds and platforms Most data available in a relational database, linked and mapped, ready to use, bringing together key external datasets required (e.g., ratings/credit, company financials, cross-reference services, pricing, and security reference data) Single vendor relationship for multiple needs Extensive experience in sourcing, aggregating, scrubbing, managing and delivering market and reference data Strong Cross-Referencing offering, including links to ultimate parents Commercial offers specific to ratings redistribution by asset managers, fund administrators, custodians and other relevant third parties for regulatory compliance purposes Benefits 38 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. Thank You Hans Crockett Vice President Innovation and Thought Leadership Global Risk Services 39 Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. Copyright 2016 by S&P Global Market Intelligence. All rights reserved. No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of S&P Global Market Intelligence or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an as is basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENTS FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages. Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P Global Market Intelligences opinions, analyses and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P Global Market Intelligence assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P Global Market Intelligence does not act as a fiduciary or an investment advisor except where registered as such. While S&P Global Market Intelligence has obtained information from sources it believes to be reliable, S&P Global Market Intelligence does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees. STANDARD & POORS, S&P and S&P Capital IQ are registered trademarks of Standard & Poors Financial Services LLC. CAPITAL IQ is registered trademark of Capital IQ, Inc. All other product or service names may be the property of their respective owners. 40

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