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Customer Success Stories


Customer Success Stories


Landbouwkrediet Group achieves IRB-compliance in risk management

The IRB (Internal Ratings Based) has been introduced as a regulatory standardized method of calculating the risks of banking activities. Achieving IRB compliance however, is an intensive process. By enlisting SAS as its IT partner, Landbouwkrediet Group was able to fully implement IRB in only three years time. As a result, Landbouwkrediet Group not only is better able to calculate its risks, but the SAS solution also provides the company with crucial insights into its other activities. This enables better and faster decision making, leading directly to an increase in the bank's solvency.


SAS tools help improve risk calculations and increase solvency

Landbouwkrediet Group is an independent Belgian financial group that has its roots in 1937. It consists of Landbouwkrediet and its subsidiaries Keytrade Bank, Europabank, Centea, and Landbouwkrediet Insurances. Originally it provided credits to the agriculture and horticulture sectors and, as such, has strong financial expertise in these sectors. In addition, it offers a complete spectrum of banking and insurance products for households, independent professionals, and businesses. Landbouwkrediet Group has 3,920 employees, 955 branches, and 1,207,000 customers.

Complying with risk calculation regulations

In 2007, Landbouwkrediet Group was able to fully meet the regulations established by the Basel Committee on Banking Supervision (Basel II). Basel II requires that banks calculate the required capital reserves they must maintain in order to cover their major exposures and report these risks and capital reserves to financial markets. "Landbouwkrediet Group met the regulations in only nine months time, as a direct result of using SAS solutions," explains Joris De Backer, Risk Manager at Landbouwkrediet Group. "Since then, we have extended the use of our SAS-based reporting tools to the banks that we have acquired, including Keytrade Bank, Europabank, and Centea."

Accomplishing IRB compliance in three years

After reaching Basel II compliance, Landbouwkrediet Group decided to complete an ambitious move to the IRB risk calculations approach for all of its operations and to do so within only three years. Again, Landbouwkrediet Group relied upon SAS to achieve this objective. According to De Backer, "Choosing SAS was self-evident. Firstly, SAS has all of the necessary analytical tools to develop, calibrate, validate, and back-test our risk models. Secondly, SAS has the optimal solution for systematically reporting risk calculations. This enabled us to quickly deliver the required statistical analyses and meet all of the regulatory deadlines."

Modularity enables a phased implementation

"Another advantage of SAS is the modular character of their tools," continues De Backer. "Close collaboration with SAS consultants made it possible to perfectly tailor the tools to fit our changing technical and reporting needs. In this way, we were able to make a rather humble start in implementing IRB and gradually take on the more complex and exacting transitions."

Better risk assessment increases solvency

As a direct result of the SAS project, Landbouwkrediet Group is now able to better define its exposure and monitor its risks. Landbouwkrediet Group can now easily follow the evolution of its exposure for each of its many portfolio segments. "As a result, we can quickly intervene when cautious measures need to be taken," observes a satisfied De Backer. "The tool also enables us to more accurately evaluate and price the risk of our independent agents' dossiers." The more stringent calculation of required capital reserves frees up capital for additional transactions, thereby enabling new banking business opportunities. "Most of all, our solvency has increased considerably. Since our IRB compliance, our capital ratio increased from 13% to 18.7%, where 2% is due to the IRB project", notes De Backer.

Increasing functionalities

Landbouwkrediet Group has achieved IRB compliance for its entire retail portfolio. The next goal is to gradually make the rest of its portfolios IRB compliant in the near future as well. This will include those of the newly acquired Centea Bank. "In the long-term, we intend to use SAS tools to analyze the synergy between credit and market risks," concludes De Backer.

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Landbouwkrediet Group

Business Issue:
SAS® Credit Risk Management
Obtaining IRB-compliant credit risk management
  • Internal Ratings Based (IRB) compliance. SAS tools enabled Landbouwkrediet to comply with this regulatory standardized method in only three years.
  • Better risk assessment. Landbouwkrediet can calculate its exposure much more accurately and follow up its evolution on a more time sensitive basis, thus enabling faster decision making.
  • Improved solvency. Better risk calculations enable Landbouwkrediet to tie up less capital, considerably increasing solvency.
Lessons learned

Landbouwkrediet achieved full IRB compliance in only three years and increase its solvency. In the process, they learned a great deal, including:

  1. Gradual implementation leads to success
    They took a conservative approach to implementing IRB with SAS by starting with the easiest sections and gradually taking on the more complex aspects. Due to its modular characteristics, the SAS solution provided the ideal building blocks for the entire project.
  2. Start with the most important parts
    Landbouwkrediet started by making their retail portfolio IRB-compliant, since this posed the greatest exposure. They can now make the rest of their portfolio IRB-compliant in a next stage with total confidence.

"Using SAS risk management tools has enabled us to fully comply with IRB regulations in only three years. Moreover, we have considerably increased our solvency as a direct result of better risk calculations."

Joris De Backer

Risk Manager at Landbouwkrediet Group

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