Landsbanki prepares for Basel II

New markets represent new risks, but also new opportunities. Landsbanki builds their success with growth on knowledge and strategy, and they have therefore chosen a credit management platform which can embed controlled international growth and a solid Basel II solution at a high level. On top of that, the bank increases their competitiveness.

Landsbanki’s success as an ultra modern international bank is the result of determined strategic planning combined with a secure sense of sound business and hard work.

- It is deeply rooted in the Icelandic culture that one must work hard, but at the same time we are very close and we can se how everybody are doing in such a relatively small community. Neither the client nor the Bank Manager can hide. Therefore, Landsbanki has only very little loss of credit on their home ground although over the years, the bank has naturally taken some calculated risks. This has given Landsbanki a tradition for fair credit rating and transparency, Senior Credit Risk Manager Einar Hardarson in Landsbanki tells.

Among the biggest in the Nordic region
Today, Landsbanki is one of the Nordic region’s 10 largest banks. They work systematically to execute an ambitious growth strategy beyond Island’s borders. Landsbanki is the oldest bank in Island and more than 120 years old. Originally, it was established as a state owned bank.

However, as a consequence of a smooth privatization where the state sold the remaining 45 percent of their shares to Samson Holding in 2002, the bank has gone through a considerable change and achieved impressive growth rates of up to 50 percent a year. This is not least the consequence of moving across the Atlantic Ocean to Great Britain, Luxembourg, New York and Halifax. At the same time, the bank has consolidated a dominating market share on the market of personal customers in Island.

Multiplied portfolio
Today, Landsbanki gets 45 percent of their revenue outside Island’s borders and they are planning to increase this to 50 percent this year. With an international expansion, which has multiplied the revenue as well as the customer portfolio, it demands considerable resources to monitor, manage and analyze data in the bank’s credit portfolio.

Therefore, over several years, the bank has systematically worked to optimize the risk management and to build up a future proof fundament to monitor and manage risks and to automate processes. In 2005, the bank started to search the market for an intelligence platform, which could match and help the bank comply with the Basel II requirements.

- After having searched the market, we chose SAS^® Credit Risk Management for Banking Solution as the basis for our strategic credit risk management. By means of advanced SAS tools, which ensure a comprehensive risk management environment and documentation all the way through, we will be able to comply with the Basel II requirements on the standard level and later on the advanced level, Einar Hardarson says.

Easier compliance
- We have always controlled our credit risks on all conceivable parameters. We believe that the new SAS platform for managing credit risks will be advantageous and make it easier to comply with the Basel II regulations. The speed at which we can acquire knowledge – which gives us overview and insight – is very important to our business. It is essential for us to have a state-of-the-art solution which ensures that we are ready to meet future legal requirements and challenges, Einar Hardarson emphasizes.

- International business and multiplied portfolios are demanding. It is like a cube. We can se what will happen to the group’s risk profile if we turn in different directions. SAS Credit Risk helps us, among other things, to make stress test and calculations and to measure and report. The latter is a core area in our world, Einar Hardarson points out.

Better information
- Time is money. We therefore need to obtain information faster than our competitors. This will give better prices to our customers and the stock holders will get a better dividend, Einar Hardarson says and explains:

- The implementation of SAS Credit Risk Management for Banking Solution on Basel II Standardized and later on IRB level will prepare us even more for competition, and will allow us to act faster.

- My expectations are that life in the Credit Division will become much easier after the implementation of the SAS solution. We will be able to answer faster and more accurate on inquiries and ad hoc reports. Not that we were not accurate before, but it will be on the extreme margins that we will be ahead of our competitors.