VUB manages risk by looking into the future
Thanks to SAS® analytical software for risk management, Slovakia’s VUB bank better optimizes its liquidity, manages interest rate risk and makes decisions while considering both current and future scenarios.
It’s extremely important for large banks to have the ability to predict future scenarios, as it’s difficult to quickly change course and go in a new direction. Therefore, seeing future obstacles and assessing various influences as soon as possible are critical when developing forecasts. "A robust tool is needed," notes Hronec.
VUB, after many years of experience with SAS analytical software, decided to deploy SAS for Enterprise Risk Management. The primary incentive (for implementing SAS) was so that risk managers could generate forecasts to optimize liquidity. "Thanks to our new look into the future, we can better decide whether to gather financial resources for five or 10 years," explains Hronec. In other words, the bank can make better decisions about what level of cash (liquidity) it should keep/acquire. For example, VUB can now predict what the structure of its assets and liabilities will look like in six months, or in two years.
Looking into the future
Simulations of new business gains, such as an increase in deposits and loans or what future interest rates may be, help managers estimate the development of the bank’s net interest income. These are particularly important forecasts since interest income forms the largest part of a bank’s earnings.
For example, VUB has used future scenarios when deciding on bond purchases. "If we did not have this view, we would have not bought them in such a structure as what we finally decided," he notes.
Because it’s hard for banking clients to see the benefits of risk management – and difficult to prove the return on investment – banks may think it’s not necessary to use an enterprise risk management solution. However, Hronec notes that after his experience using SAS, he feels that the sooner a bank deploys a sophisticated risk management solution the better, because it brings new insights that help to make better decisions.
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Andrej Hronec, Head of Assets and Liabilities
Improve asset and liability management, manage interest rate risk.
SAS for Enterprise Risk Management
VUB bank can now more accurately predict the future structure of assets and liabilities; optimize cash flow to calculate interest rate risk with greater accuracy; and use various scenarios to predict the impact of future developments.
“Thanks to SAS, we know our level of assets and liabilities -- whether there will be a profit or a loss.”
Head of Assets and Liabilities