B&N Bank leads the charge to meet Basel II regulations

Since the worldwide financial crisis was at least partly caused by credit and financial institutions inadequately assessing their own operational risks, regulatory authorities in some countries toughened requirements for risk management in financial institutions.

Managing operational risk under Basel II leads to a decrease of capital requirements, therefore improving capital allocation. In addition, over the last 10 years it has been demonstrated that operational risk is related to reputational risk, as it can damage the image of the company and have a significant impact on business.

B&N Bank, which offers a broad range of high-tech products, is one of Russia's largest commercial banks. After implementing the SAS solution for operational risk management, it became one of the first banks in Russia to have successfully assessed and managed operational risks to meet Basel II standards.

With SAS OpRisk Management, we have significantly improved key business processes and are ready to transfer to Basel II today. Plus, when the national supervisor authorizes the application of the advanced method for estimation of capital at risk, the implemented system will help us save money through size reduction of the capital reserved for operational risks, while complying with the N1 capital adequacy indicator.
Rustam Bedredinov

Rustam Bedredinov
Director, Operational Risk Management

SAS delivers results

After evaluating several vendors, B&N Bank decided that SAS® OpRisk Management best suited its needs. The bank based its decision on several criteria: system functionality, global reach, price/quality ratio and the probability of obtaining authorization from the national supervisor to apply the "advanced method" for estimation of capital at risk (the rationale for the model applied).

SAS OpRisk Management was the only solution that fully met the bank's requirements and offered the best combination of functionality and price. Rustam Bedredinov, Director of B&N Bank Operational Risk Management, noted that with the SAS solution, the probability of obtaining the national supervisor's authorization for implementation of the advanced Basel approach was considered "very high."

SAS also offered corporate stability, global reach and quick implementation. In just three months, SAS OpRisk Management was operational at B&N Bank.

Technology in action

SAS OpRisk Management is a professional solution enabling B&N Bank at the first stage to enter and analyze incidents of operational risk as well as the reasons for their occurrence. The system has a convenient interface for entry and evaluation of information, including the use of complex statistical methods. With the SAS risk management system, businesses can assess processes based on accumulated incidents and quickly act to reduce dangerous events. SAS OpRisk Management also establishes a system of risk indicators that can help optimize business processes.

The SAS solution includes a set of reports and an analytical tool that not only enables a review of current numbers, but also the ability to build a substantiated prognosis. The bank's risk managers can build reports based on any given set of parameters and develop them independently, without help from IT experts. The logical completion of the complex SAS operational risk management system is a module for estimation of operational risk level in a monetary form, as well as in terms of capital at operational risk, by using the advanced measurement approach, which will be authorized by the national supervisor for use in Russia in the future. The first steps in this direction have already been made.

More efficient processes, reduced cost

Thanks to the SAS solution, B&N Bank has automated incident processing operations in more than 10 bank services. Instead of 15 systems of a highly specialized profile for document processing and routing with 15 different teams supporting these systems, the bank now engages only one system and one team.

Efficiency, as well as the quality of incident-related support, has increased, and operations have become more transparent for both the risk managers and the managers of these divisions.

Since the profile divisions handle their own problems and incidents, the bank was able to decrease the amount of work for operational risk managers. There was also no need to have operational risk managers in the bank's regional hubs. As a result, the bank's savings increase each month on an accrual basis and with establishment of each new regional hub.

Even though the SAS solution is fully implemented and all employees have been trained, B&N Bank continually strives to improve its system. More and more divisions have started using SAS OpRisk Management information. B&N Bank is also confident that its implementation will provide a basis for the national supervisor of the Russian Federation to apply the advanced approach for estimation of capital at operational risk in line with the recommendations of Basel II. It is crucial for a regulator to have a transparent system that's stable and meets international standards, and SAS meets the criteria.

Challenge

Implement risk management software to minimize losses, forecast potential problems, automate processes, reduce operational costs and ultimately help meet Basel II industry regulations.

Solution

SAS® OpRisk Management

Benefits

B&N Bank was one of the first banks in Russia to have successfully implemented a risk management system based on Basel II.

The results illustrated in this article are specific to the particular situations, business models, data input, and computing environments described herein. Each SAS customer’s experience is unique based on business and technical variables and all statements must be considered non-typical. Actual savings, results, and performance characteristics will vary depending on individual customer configurations and conditions. SAS does not guarantee or represent that every customer will achieve similar results. The only warranties for SAS products and services are those that are set forth in the express warranty statements in the written agreement for such products and services. Nothing herein should be construed as constituting an additional warranty. Customers have shared their successes with SAS as part of an agreed-upon contractual exchange or project success summarization following a successful implementation of SAS software. Brand and product names are trademarks of their respective companies.

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