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6prog consultants | Case Study

PRIIPS implementation for fund linked derivatives.

The client, an international bank, was under severe pressure to be able to continue to offer their full suite of derivative products in Europe to its client base. Unfortunately their chosen 3rd party Key Information Document (KID) provider had been unable to commit to the support the KID generation for more complex payoffs in time for the regulatory deadline.

Over a period of 4 weeks I developed a remediation plan to address all products and payoff combinations prioritised by the business for end of year delivery.

The aim of the PRIIPs Regulation is to encourage efficient EU markets by helping investors to better understand and compare the key features, risk, rewards and costs of different PRIIPs, through access to a short and consumer-friendly Key Information Document (KID). How information in the KID should be calculated and presented is set out in the PRIIPs Regulatory Technical Standards (RTSs) Further Reading.

This involved stakeholders across five functions, a collection of systems that made for a unique architectural challenge and staff who were distressed with the lack of engagement and support provided by the 3rd party solution.

First:

I engaged the quant department to Python script the scenario simulations and risk indicators.

Second:

Engaged internal, external legal counsel and the structing department to draft the KID templates for each product and payoff combination.

Third:

We advised stakeholders weekly on our progress thought the project updating them on progress and providing feedback on the challenges as they arose.

Finally:

I provided a regulatory white paper that was presented at the European industry regulatory forum on appropriate treatment of cost and charges for underlying funds for fund linked derivatives

I finished the project after 8 months with a solution and structured plan to integrate the full product suite and payoffs into the strategic solution. In the first two months after the regulation went live the business were able to issue in excess of £250 million notional of product using this solution.