Basel III Capital Automation and ROC/RAROC Framework
Kuwaiti bank
The bank calculated regulatory capital through manual spreadsheet overlays and in-house processes, and ran return on capital through an Excel calculator. ALP automated the capital calculation end to end and built a governed ROC and RAROC system on top of it.
Scope of work
Pillar 1 RWA automated across credit, market and operational risk, on a five-layer architecture running from source systems through an ETL and data layer, orchestration and governance, the calculation engine and the presentation layer.
Risk modules built to the standardised approaches with configurable rule tables:
- Credit risk: exposure classification, ECAI risk weight assignment, credit conversion factors, credit risk mitigation under simple and comprehensive approaches, and post-mitigation aggregation to facility and group level
- Market risk: standardised approach with configurable parameters
- Operational risk: basic indicator and standardised measurement approaches
Governance embedded by design rather than added afterwards:
- Maker-checker workflows with segregation of duties across maker, checker, approver and viewer
- Parameter versioning with effective dating, and an immutable audit trail
- Full data lineage, with group consolidation through a structured upload interface and validation rules
Three-stage validation of the existing ROC and RAROC calculator, covering documentation review, calculation logic walkthrough and independent test case reconciliation, with every editable input mapped to its definition, data type, source and validation rule.
Benchmarking across jurisdictions, assessing conceptual soundness, governance, data quality and regulatory alignment across Kuwait, UAE and Egypt, against GCC peers and international standards including BCBS Pillar 2, PRA and ECB guidance, with jurisdiction-specific hurdle rates estimated from market data and peer disclosures.
System automation through a governed interface replicating the bank's approved logic exactly, with no redesign and no undocumented assumptions, separating relationship manager inputs from risk and administrator parameters.
Outcome and value
- Manual spreadsheet overlays replaced by an automated, governed capital calculation.
- A formal validation report covering income treatment, FTP curve construction, PD and LGD parameterisation, the capital denominator and RAROC in credit pricing.
- Pillar 3 disclosure portal and management dashboards delivered alongside the engine.
- Consistency established across the bank's three jurisdictions.