SAS® Risk Management for Banking

Customer Information

Euro Bank SA is a commercial bank offering financial services to individuals, providing its clients with access to a wide range of daily banking products and high service standards. The Bank's offer includes modern solutions in the area of payments (e.g. multi-currency card) or cash loans (e.g. internet loan). A dense network of branches throughout Poland (nearly 500), as well as easy access to products through online banking and a modern mobile application complete the image meeting the needs of the "everyday bank" client.

Business need

One of the key elements ensuring effective and safe risk management in the area of ALM (liquidity and interest rate risk management resulting from mismatching of terms of assets and liabilities) or CAD (capital adequacy management) is to ensure that management decisions will be made on the basis of reliable and high quality data and reports. This is particularly important in the banking sector, which operates in the rigid framework of regulatory and quality in risk management and structural capital is subject to rigorous control and supervisory ratings.

Implementation of management and operational processes in the above-mentioned areas based on dispersed and logically inconsistent data sources is associated with difficulties in construction, coordination and maintenance of an integrated reporting environment. It significantly increases time-consuming data processing and limits the flexibility in quickly adapting such a solution to current business needs and new regulatory requirements. In addition, as the Bank grows-up, product diversity and data volumes are also growing, which has an impact on the increasing number and complexity of reporting processes. As a result, the quality of resulting data, proper and appropriately fast assessment of the bank's risk exposure, as well as the ability to react and the decision-making process itself are subject to higher operational risk.

Being aware of the above problems, we understood need to look for solutions enabling the transformation of technical infrastructure towards a properly designed financial data model and an analytical and reporting platform based on it, appropriately parameterized. The use of tool support automates and optimizes the processes of measuring, monitoring and reporting structural risk and capital adequacy, ensuring the appropriate quality of management information while reducing the waiting time for data.
The choice of SAS solution was determined by its advantages, including:

• Possibility to adapt the solution architecture and implemented methodological assumptions to Bank's business requirements and existing processes,
• Consistency of the data model and reporting solutions implemented in the engine of the analytical and reporting platform in the areas of data storage, processing and management,
• Possibility to manage the reporting infrastructure based on a dedicated system of dictionaries for parameterization of rules and assumptions describing individual reports,
• Flexibility of the solution in terms of expandability with new reporting areas, resulting from business needs as well as emerging new regulatory requirements,
• Substantive and technological support from SAS consultants at every stage of the project and after the implementation of the tool.

Business goals

• Improving quality of source data through the implementation of a homogeneous and coherent model of financial data, covering in comprehensive and multidimensional manner the Bank's business activity,
• Creation of an integral and interdependent reporting infrastructure to meet comprehensive internal, group and regulatory needs,
• Automation and optimization of data processes, including shortening waiting time for management reports,
• Ensuring the possibility of effective management of the reporting environment by business users,
• Better control over reporting processes and reduction of operational risk.

Solution

The implementation of the tool's full functionality was a two-step process. In the first phase, data warehouse was built based on a model combining data from many distributed systems and data sources in one logical structure. In the second phase, the System was enriched with a comprehensive analytical and reporting platform (SAS Risk & Finance and SAS CAD).

The solutions implemented as part of SAS Risk & Finance are used by units responsible for asset and liability management (ALM module) and capital adequacy reporting (CAD module). The Unified Risk & Finance Data Mart is the basic source of analytical data in product and accounting terms for entities dealing with broadly understood financial reporting, credit risk and modeling.

Obtained benefits

The implementation of the solution has shaped new standards in the Bank in the field of organization and management of data as well as optimization of their processing. Unification of the data model and coherence of variable definitions allowed for a significant improvement in data quality and development of multidimensional control and reconciliation mechanisms. Integrated and interdependent reporting environment, based on one data source and common transformation logic, significantly reduced the time needed to generate cross-sectional ALM and CAD management information for internal, group and regulatory needs. The implementation of an automatic conversion schedule equipped with the ability to track the correctness of processes and a number of reconciliation and control mechanisms significantly reduced operational risk. By using the functionality of the dictionary management system, it became possible to parameterize individual reports and data processing rules from the level of dedicated dictionary structures without uncontrolled user interference in the structure of the solution. The ability to cross-sectional and consistent adoption of the entire infrastructure to changes resulting from the implementation of new products or new guidelines of supervisory authorities has also been significantly improved.

The architecture of the Solution has been designed in a way that provides flexibility in introducing modifications or extensions with new functionalities and reports resulting from current business needs and regulatory requirements. The Bank is constantly updating the data model and reporting environment due to changes in the product offer for customers, as well as according to needs related to the use of new financial instruments and guidelines resulting from the implementation of new reporting standards (IFRS 9). For example, new regulatory reporting packages in the area of liquidity (i.e. LCR, NSFR, ALMM) have been successfully implemented, ensuring their full integrity with the existing reporting environment.