Case Studies

CASE STUDY: BANKING

Setting up of the Enterprise Wide Risk Architecture at one of the largest bank in United Arab Emirates

Business Need

The bank had implemented a core banking system that was new. It had a failed data warehouse implementation in the recent past. It was saddled with legacy systems that needed to be changed and at the same time there was pressure from the central bank and the management to have a state of art risk management infrastructure such that they know of the customer positions every time, with management dash boards. Moreover, the bank was in a high growth trajectory with changes in the business lines and new services and products were being added. At the same time there were internal reorganization in the structure of the bank, and some of the affiliates and subsidiaries of the bank were absorbed into the main banking structure.

Solution

We conducted the study of the systems landscape, the processes and the data infrastructure at the bank. The main challenge was working around the legacy systems and systems that are implemented recently which are not matured in the ecosystem of the bank. We came up with the "To Be" logical data model that was required for the compliance related work of Central Bank reporting, Basel capital engine, Asset Liability Management, Counterparty Credit Risk Management, Market Risk Management, the Operational Risk Management, Funds Transfer Pricing and Risk Based Pricing, Account Profitability and Relationship value management and comprehensive collateral management.

The logical data model that was designed was transformed to the physical data model and extraction logic was designed. A transformation layer was designed and implemented and the customer onboarding process was centralized with KYC norms. The risk data mart was designed which was used by the risk, finance and the business divisions of the bank, with a single version of truth. The architecture designed was nimble enough to changes. Hence, none of the source systems was touched and through a mixture of the internal process change and business logic layer, the risk architecture was set up.

Through the changes in the process and the business logic layer, it was ensured that bank does not touch the legacy systems and source systems. Substantial efficiency of scale was realized due to reduction in the repetitive tasks and at the same time cost reduction was achieved in the immediate and long term due to the same. The bank now had the risk dash board which it is using to know the customer positions and reporting both for the internal and external reporting takes place from the central data layer of the bank.


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CASE STUDY: BANKING

Concept, Design and Implementation of the Global Limits and Collateral Management

Business Need

The above mentioned project was successfully implemented for one of the largest banks in the middle-east. The bank in question has operations in 7 countries across the world. It had core banking systems catering to Whole sale banking, retail banking, Islamic banking, syndications, mortgages, Overseas banking operations. The customers were duplicated into each of the systems, the limits were allocated inefficiently across the systems, and collateral management was inefficient, ineffective and manual. There was no synchronization between the accounting information, the business information and the risk information for the customer position, limits, collateral and performance. As a result of which, limits were over extended by the bank and the capital allocation was not efficient.

The bank wanted to have efficient limits and collateral management across the banking and the trading book and Islamic and conventional banking. With the above back-drop bank approached RiskTech to provide the solution.

Solution

RiskTech Studied the bank and designed and delivered "Global Limits and Collateral Management" The bank was divided into various sub segments based on the business lines and the business was made owners of the limits for the customers within the bank. The treasury, credit administration and the trade finance operations, were delineated as operations unit within the bank from the credit risk management within the banking book. The central limits and collateral management platform was implemented and hence none of the core banking system had the controlling limits. Only the operational limits for the overdraft was maintained in the core banking systems, that too through the central limits layer. Moreover, aggregate portfolio level limits were designed and implemented like the "Program lending", country risk limits. The customer level limits were group limits with individual entities in the group utilizing those limits with the overall operating thresholds for each entity within the group. The individual units within the bank could now view the limits of the customers and internal limits lending and borrowing as a process was implemented so that the customer level limits are always utilized to the fullest extent. As a result, for giving additional limits the business units did not have to go the credit committees and would first utilize the unutilized limits from other business units. The collateral management was centralized and hence, bank started viewing the group limits, outstanding and corresponding collaterals. The collaterals were valued and marked to market daily depending whether they are physical, legal or financial collaterals. The Outstanding definition was stream lined within the bank with the risk, business and finance control agreeing to common definition for the calculation of the current outstanding, gross outstanding and net outstanding for the customer.


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CASE STUDY: BANKING

Conceptualization, Design and Implementation of the Credit Origination and Credit Administration System

Business Need

The above mentioned project was carried out for one of the large regional banks in United Arab Emirates. The bank in question had 12 business lines under the wholesale and SME banking. The bank did not have retail banking and it was a wholesale and corporate bank. The bank has two failed attempts in the past of implementing such a system and approached RiskTech for the functional and technical knowledge to implement such a system.

Solution

RiskTech consultants understood the requirements and concluded that a Business process management system will not be able to solve the problem of the bank since the bank was looking at four things at the same time. A workflow management for automation, a rule engine to automate the complex delegation of authority matrix which was based on amount, rating, collateral and other mitigant, a limits engine that will all the time aggregate the positions for the customer/ group across the various business units and reporting engine that is risk based.

RiskTech designed and implemented such a system from scratch for the bank with all the above complexities and did a real time interface with the core banking system. Hence, the limits were originated and approved within this system and upon the documentation and go ahead from the credit administration department, the limits were real time pushed to the core banking system of the bank. The rule engine of the bank could automate the entire delegation of authority within the bank, and the workflow routes were automated with committee functionality and voting and the quorum for the decision making.

All the business lines within the bank could work simultaneously with the same customer/ group. However, no business line could have any power/ authority to change the limits of another business line. The same held true for the collateral and documentation.

The credit administration was automated with the automation of the collateral valuation and complex netting rules were implemented into the system.


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CASE STUDY: BANKING

Implementation of the Credit Risk Management for the Treasury products

Business Need

One of the largest banks in the middle-east wanted to implement credit risk management for the treasury products across the Islamic and Conventional banking. It needed to implement the credit risk definitions for the counterparts across the both the books and wanted to ensure a straight through processing (STP) for the same.

Solution

Through years of implementation, the consultants from RiskTech knew that the credit risk from the treasury point of view has two legs. One, the deals with the corporate counterparts and second, the deals with the banking counterparts. The risk management for both the types of entities are different since the method of giving and managing the limits are not same. For the corporate counterparts, the credit risk was managed through giving credit lines depending on the transaction to be hedged. Hence for a single product, the corporate could have multiple lines. For the banking counterparts, the credit risk is maintained and managed through products. The same was implemented through the treasury implementation, so that bank can know which of the banking book lines were hedged through the treasury product by the corporate. At the same time, the counterparty credit risk for the banking counterpart were managed through broad asset classes and mapping of the risk parameters of the product to the asset classes. The credit risk arising of the market operations for the banks were also managed and monitored.



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