HypoVereinsbank takes control with SAS^®

European banking giant HypoVereinsbank (HVB) wanted to improve portfolio quality and control. In 2004, HVB created the Active Credit Portfolio Management (ACPM) Division to change the Corporates & Markets business division's credit portfolio management from "buying and storing" credits to active management. Portfolio managers needed a reliable way to actively control their portfolios. HVB is now using SAS to centralize its credit portfolio management while helping to diversify its holdings and avoid risk.

Data integration processes provide flexibility, speed and uniformity
The HVB Group is the second-largest publicly quoted bank in Germany and, with Bank Austria Creditanstalt, is the undisputed market leader in Austria. With more than 57,000 employees, 2,085 branches and over 9.8 million customers, the HVB Group is the number one bank in the heart of Europe. It has positioned itself as the leading network in its core markets of Germany and Austria and in the growth region of Central and Eastern Europe. It concentrates on European private and corporate customer business, supplemented by customer-related capital market activities.

When HVB decided to change the Corporates & Markets business division's credit portfolio from "buying and storing" credits to active management, it needed to provide its portfolio managers with a reliable way to control their portfolios. "In particular, we want to intensify the use of credit derivatives for hedging and for the targeted development of diversified risks, in order to improve the quality of the portfolio," explains Eckart Schröer, Director, Head of Information Management within the ACPM division. A further classic objective in portfolio management, according to Schröer, is the avoidance of risk concentrations (so-called 'clumps') and undesired correlations that could set in motion a domino effect on other business in the event of a credit failure.

Quantity and quality
Active portfolio control requires the HVB group to incorporate a vast quantity of heterogeneous information sources into its tools and models. To improve the quality of its data integration processes, the HVB Group chose to work with SAS, including SAS Data Integration Studio running under SAS®9.

With SAS, HVB has integrated credit portfolio management data that contains information from 75 difference sources. "We use information from DB2, Oracle, Sybase and flat files, running on MVS, Unix, OS/400 or Microsoft NT and XP operating systems. That is to say, we access practically all the systems that the IT world has ever produced," says Schröer. To create a consistent data management system, all the information is first stored temporarily in an operational data store (ODS). The ODS ensures the logical consistency of all the data and acts as the "single point of truth." In a second step, the data contained in the ODS is distributed across various data marts where it is kept available, in optimized form, for specific tasks and for evaluation.

Single point of control
For Schröer, the advantages of using SAS are obvious: "Not only can we link up the heterogeneous sources transparently – we also have a single point of control via the integrated metadata management." This means that all the database elements can be managed centrally.

The key figures that are held in the data marts include credit parameters (exposures), failure probabilities, expected loss, value at risk, equity tied up, RAROC (risk adjusted return on capital) and daily stock exchange evaluations of open items on the future market (market-to-market evaluations), plus various volatility parameters. The sources for these figures are the commercial corporate client business and front office trading systems, plus external sources that provide market and rating data. "Our division now works with a fully automated reliable database that provides transparency as regards the portfolio, risk distribution and market evaluation. So we can develop and implement portfolio strategies that look to the future," Schröer summarizes.

Better transparency
HVB decided to introduce SAS in June 2004 and has been using SAS integration solutions to manage data centrally since February 2005. "We were amazed by the extremely short development time for our data integration environment," says Schröer. "In addition, we were impressed by the problem-free, transparent integration of the different data sources. No other supplier could have done this for us." The most important change is the new independence of the Corporates & Markets business division: "With SAS, our division will be able to develop or modify all the loading and transformation processes itself at short notice, because programming is no longer required. Earlier, we had to write a special request for the IT Department, which meant that implementations took far more time." The new solution offers more flexibility combined with faster development and better transparency.

The most important objective was to replace programming with a uniform, transparent development process based on integrated metadata management. Schröer says the users accepted the new data environment very well. "The data foundation has become much broader since we started using SAS. And the portfolio managers have come to value the fact that additional data sources can be quickly integrated into processing."

Benefits

• Database for the evaluation and active control of the loan portfolio
• Wider information base for portfolio management
• More departmental control and management of ETL (extract, transform and load) processes
• Data environment that can access 75 extremely heterogeneous data sources
• Central, open and transparent metadata management
• Excellent flexibility regardless of platform, operating system or data storage system

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