XETRA: SNT Reuters: SNTS.VI Bloomberg: SNT AV US-OTC: STSQY Risk Management in the Financial...
-
Upload
liam-ironside -
Category
Documents
-
view
213 -
download
0
Transcript of XETRA: SNT Reuters: SNTS.VI Bloomberg: SNT AV US-OTC: STSQY Risk Management in the Financial...
XETRA: SNTReuters:
SNTS.VIBloomberg:
SNT AVUS-OTC: STSQY
www.snt.at
Risk Management in the Financial Services Industry
24 February 2004
Dan LISTEŞ,Business Development Manager, S&T Romania
IT in Emerging Europe
What Meridien Research says:
“ Whether planners and users of risk management systems realize it or not DATA is the single most important component of risk management. Planning and implementing a comprehensive data architecture to support risk is the only reliable way to ensure risk calculations are accurate, comprehensive, and available, to business decision makers …”
IT in Emerging Europe
Basel II - 3 Pillars
Banks MUST produce risk measures for Capital Adequacy Calculation: possible with standardized and internal measurement approach
They WANT to do this as accurately as possible to preserve profitability: possible with internal measurement approach
Minimum CapitalRequirements
•Meaningful differentiation of risk types
•Completeness and integrity of rating assessment
•Oversight of the rating system and processes
•Criteria of rating system•Estimation of PD•Data collection & IT systems•Use of internal rating systems•Internal validation•Disclosure
SupervisoryReview
Strong emphasis on risk reporting and disclosure of measures and techniques
MarketDiscipline
Data Model
Mapping
Data Management
Standard Analytics
Business Rules
Advanced Analytics
Disclosure
Standard Reports
Intelligence
IT in Emerging Europe
Basel II Minimum CapitalMinimum Capital
RequirementsRequirementsMarketMarket
DisciplineDiscipline
VariousReporting
Tools
Mark
et
Ris
kC
redit
Ris
kO
pera
tional
Ris
kStandardized Approach
Internal Measurement Approach
Standardized Approach
Basic Indicator Approach
Foundation Approach
Advanced Approach
InternalRatingsBasedApproach
Standardized Approach
Internal Measurement Approach
SupervisorySupervisoryReviewReview
Risk Warehouse
IT in Emerging Europe
SAS Risk Management For Banking
SASRegulatoryReporting
Portal
SAS Fraud Detection Solution
SAS Individual Credit Risk Solution
SAS Market Risk Solution
SAS It Management Solution
SAS Human Capital Solution
SAS Money Laundering Solution
SAS Financial Management Solution
SAS Fraud Detection Solution
SAS Portfolio Credit Risk SolutionSASRisk
Warehouse
SA
S R
isk
Pe
rfo
rma
nc
eM
ea
su
rem
en
t S
olu
t io
n
Mark
et
Ris
kO
pera
tion
al
Ris
kC
red
itR
isk
Standardized ApproachStandardized Approach
Internal MeasurementInternal Measurement Approach Approach
Standardized ApproachStandardized Approach
Basic Indicator ApproachBasic Indicator Approach
Foundation ApproachFoundation Approach
Advanced ApproachAdvanced Approach
InternalInternalRatingsRatingsBasedBased
Standardized ApproachStandardized Approach
Advanced Measurement Advanced Measurement Approaches Approaches
SupervisorySupervisoryReviewReview
MarketMarketDisciplineDiscipline
Basel II and More…Basel II and More…
IT in Emerging Europe
The Big Basel II Issue(s) for Banks
• Effectively integrating different risk types• Ensuring data integrity & timeliness of figures• Guaranteeing accurate calculation of risk
measures• Interpreting analytics for regulatory reporting–risk
disclosure• Implementing better risk management processes• Overcoming lack of data integration. • Conversion of market risk oriented systems to
meet Basel II requirements • Compliance with supervisory rules
IT in Emerging Europe
Basel II - Hot Topic
• Estimated cost of $2250bn to the world's 30,000 largest banks for Basel II compliance.
• Basel II should (if implemented correctly) help to increase shareholder value and profitability levels through improved enterprise risk management.
• Able to demonstrate that their supervisory and internal risk control processes are sufficiently robust and transparent to meet the new standards
• Responsible for allocating resources and overseeing Basel II program e.g: Tier 1 Bank budgeted approx $50m, Tier 2/3 Banks $10- 30m
• Must have a risk management strategy
IT in Emerging Europe
Basel II spending trends
0% 100%
2003
2004
2005
2006
2007
2008
ApplicationInfrastructure
50%
• The near term spend will be infrastructure based as banks seek to develop core IT infrastructure to support data management requirements
• Banks will focus on improving risk applications as parallel running nears in 2005
• Following implementation, banks will be required to make incremental investments in modelling and analytical applications to satisfy regulatory demands
IT in Emerging Europe
Rethinking Risk ... Value from Basel II ?
Source: Crouhy et al. (2001). Risk Management, McGraw-Hill
Operational Risk 20%Operational Risk 20%
Current Capital AllocationCurrent Capital Allocation Future Capital AllocationFuture Capital Allocation
Market Risk 10%Market Risk 10%
Credit Risk 70%Credit Risk 70%
Operational Risk 30%Operational Risk 30%
Credit Risk 50%Credit Risk 50%
Market Risk 20%Market Risk 20%
IT in Emerging Europe
Unique Positioning of SAS for Basel II
• Existing external credit, operational and market risk banking references
• Proven successes in the delivery of the core quantitative and qualitative components in the Basel II frameworkProbability of Default via credit scoringExposure calculation via SAS for Risk ManagementRisk and regulatory reporting capabilitiesCompliance with all data delivery aspects in the Minimum Requirements
Operational risk framework and supporting solutionsProven data management expertise
IT in Emerging Europe
SAS Enterprise Risk Management – Value of Data Integration
Performance Data
Loss DataRisk Data
Risk Management
Bank Operations/ Platforms
Finance
INTEGRATED RISK
MANAGEMENT
IT in Emerging Europe
Basel II compliant SAS Enterprise Risk Management
MARKET
RISK
OPERATIONAL
RISK
CREDIT
RISK
ENTERPRISE
RISK
MANAGEMENT
IT in Emerging Europe
Risk types covered
Market RiskMark to Market and P/LVaR algorithms
Parametric: delta normal, riskmetrics, delta gammaNon-parametric: historical simulation, monte carlo
Sensitivity analysis and scenario analysis
Credit RiskCurrent & potential exposureCredit Metrics, Credit Risk
PoDPerformanceCalculation & AllocationRetail and Corporate
Operational RiskHuman, IT, Legal, ProcessesStrategic Performance
Management (Link to KPIs)
IT in Emerging Europe
The Basel Capital Accord:Credit Risk
SAS Credit Risk Solution
Credit Scoring for RetailPortfolio Risk Management
for Corporate
‘Foundation’ ‘Advanced’
IT in Emerging Europe
Types of Credit Scoring
Application ScoringPerformed at time of credit applicationResults in Accept / Reject
Behavioural ScoringRisk within existing clientsProfitability ModellingUp-Sell / Cross-Sell Potential
Collection Scoringpredict recovery value of outstanding credit
IT in Emerging Europe
Credit Portfolio Risk
Expected LossExpectedExposure
Loss in the eventof default
DefaultProbability= x x
RatingCustomerSegment
Limit UtilisationCollateral
ValueCollateral
Type
CounterpartySpecific
TransactionSpecific
Unexpected Loss = Volatility of actual versus Expected Loss experience
IT in Emerging Europe
Operational Risk - Defined
Operational Risk is the current or prospective risk to earnings and capital arising from failures in transactions with customers or counter parties, ineffective decision making, and inadequate, insufficient human resources
Types of Operational RiskPre-transaction riskProcessing riskSettlement and payments riskManagement information riskHuman resources risk
IT in Emerging Europe
Access
DataManagement
Analysis
Reporting Operational Risk Dashboard and Reporting
SAS Strategic Performance Management
Data Mining, Analytics, Value at Risk Modeling
(SAS Risk Dimensions / SAS Enterprise Miner)
Data Repository, Data Cleansing, Definitions
SAS Warehousing Suite, SAS BIM (Data Models)
Risk Self Assessment Data Repository, Operational Data Sources (legacy systems, database systems, ERP Systems, etc.), Loss Databases
Access to 50+ data sources, multi-platform
Basel II compliant SAS® Enterprise Risk
Management
Risk M
anagement O
ptimization
Strategic Advantage
IT in Emerging Europe
ATHU
CZSK
PL
UA
TR
CY
RULV
SI HR
BA YU
RO
MD
BGMK
GR
AT Austria
MD MoldovaSL Slovenia
Headquarter BA Bosnia and Herzegovina
MKRepublic of MacedoniaSK Slovak Republic
S&T Countries BG Bulgaria
PL Poland
TR TurkeyCZ Czech Republic
RO Romania
UA Ukraine
CY Cyprus RU RussiaHUHungary
Serbia and Montenegro
LV Latvia
Success in CEE
GR Greece
MT MaltaHR Croatia
MT
YU
IT in Emerging Europe
References in FSI• Ministry of Public Finance• BRD – Societe Generale• Romanian Commercial Bank• Romanian National Bank• Savings Bank• “Ion Tiriac” Commercial Bank• UniCredito• Alpha Bank• HVB• Banque Franco-Roumaine• Transilvania Bank• Transfond (deployment)
Our experience in FSI• Public Key Security
Infrastructure• Core banking infrastructure• Information system
management• Signature Scanning• SalesForce Automation• Payment Orders Tracking• Report Generation automation• Business continuity • Internet Banking• Consumer Loans
Risk Management Competence• Experienced Business
Consultants• Certified Technical Resources• Assesements/pilots on role
References in Romania
IT in Emerging Europe
What Meridien Research says:
“We believe that, in order to be in a position to comply with changes in regulation, financial institutions will have to start investing now in changes to the processes and technologies that support risk management. Significant efforts, especially in data identification and aggregation, will be needed to meet new validation and verification requirements for credit risk management”