sungard basel ii solutions
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A Flexible, Extendible,
Global Risk Infrastructure
The Accord places rigorous demands on a bank that
must be supported by an integrated risk infrastructure.
Banks must open up their methods, models,
assumptions and processes to the regulators and
disclose much more information to the general market
than has been required to date about their risk and
capital profiles. To meet these requirements in an
auditable and robust fashion demands extensive data
collection and consolidation as well as system
integration and reporting capabilities within a global
infrastructure. Key to achieving this is creating a clear
blueprint that identifies opportunities to leverage or
enhance existing systems, as well as gaps that must
be filled by implementing new solutions.
Vital Role of Data
To take full advantage of Basel II, banks must have
complete confidence in their risk data and
infrastructure. Numerous complex data involved in
credit and operational risk management, including
volumes of historical credit and operational loss data,
must be captured, aggregated, evaluated and acted
upon globally under a consistent policy framework and
a global IT system.
SunGard understands that core data aggregation and
consolidation is essential in order to reflect the risk-reducing impact of diversification across regions,
industries and specific obligors, as seen from an
aggregate, high-level view. SunGard offers
comprehensive data management with solutions that
capture and combine data from a variety of sources
and sub-systems to ensure data integrity. SunGards
Basel II solutions capture and consolidate all risks
related to the quality of a specific legal entity including
traditional banking book credit exposures (like loans,
letters of credit, un-drawn commitments, etc.),
counterparty exposures in the trading book (OTC),settlement risk (resulting from timing differences in
exchanges for value) and issuer risk (resulting from the
holding of debt or equity securities).
BankingBook
TradingBook
Credit Risk Market Risk Operational Risk
Standard Approach IRB Foundation
IRB Advanced
Credit Risk Mitigation
Best practice
encouraged by
Basel II
Sound practices
(minimum requirements)
Basic Indicator Approach
TSA
AMA
Additional qualitativerequirements for TSAand AMA
Credit risk exposuresfrom trading (OTC)positions
Standard Approach /Internal Model Approach(Nothing changed)
ALM
(Little change fromBasel I)
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SunGard Trading and Risk Systems provides integrated, enterprise-wide solutions for financial and energy trading, risk management andoperations, as well as asset liability management and financial planning and forecasting. Serving over 900 clients, it offers Web-enabledsolutions for achieving straight-through processing, and for managing market, credit and operational risk. Clients include financialinstitutions, energy companies, government agencies and corporations of every size, geographical reach and operational complexity.SunGard Trading and Risk Systems also offers systems integration, project management and consulting services.
SunGard is a global leader in integrated software and processing solutions for financial services. SunGard also helps information-dependententerprises of all types to ensure the continuity of their business. SunGard serves more than 20,000 customers in over 50 countries,including 47 of the world's 50 largest financial services companies. SunGard (NYSE:SDS) is a member of the S&P 500 and has annualrevenues of more than $2 billion.
www.risk.sungard.comCopyright 2003 SunGard. SunGard and the SunGard logo are registered trademarks of SunGard Data Systems Inc. in the U.S. and othercountries.
All other trade names are trademarks or registered trademarks of their respective holders.
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BASEL I I SOLUTIONS
Leveraging Basel II
To Achieve A Competitive Edge
www.sungard.com
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Reaching Higher Via Basel II
Risk Sensitive Approaches
for Credit Risk
The Basel II recommendations empower banks to use
different methodologies of increasing sophistication to
calculate their regulatory capital for credit risk. The
more refined the methodology, the higher the benefits
that can be achieved by the bank. Banks can choose to
implement the Standard, Foundation Internal Ratings-
Based (IRB) or Advanced IRB approach. It is vital that
institutions systems architecture is flexible enough to
support all three proposed methodologies, as well as
special local regulatory requirements and user-specific
proprietary analytics.
From the calculation of credit risk capital for on-and
off-balance sheet items, through providing robust,
transparent processes and reporting, SunGard helpsbanks automate and streamline their processes and
achieve compliance. SunGard also provides the
advanced credit risk portfolio analytics, speed and
flexibility to help banks implement current best
practice risk management techniques and meet the
expected requirements of future regulations.
We can provide incremental return on a banks
technology investment for Basel II with solutions that
are proven, mission-critical and extendable.
For on-balance sheet items, our solutions provide the
capital allocation calculations required by Basel II, as
well as integrated data management, interest rate risk
and asset liability management and workflow tools. For
off-balance sheet items, we provide a technology
environment for banks to collect and consolidate the
full range of credit risk data, compute credit risk
exposures, store internal and external credit ratings
and produce the range of reports required by the
Accord for greater transparency.
SunGard solutions offer robust credit portfolio
management of on- and off-balance sheet items to
help banks identify and reduce global portfolio risk,
increase business opportunities through the sharing oflimits, and align regulatory and economic capital.
The proposed Basel II Capital Accord is designed to facilitate a more
comprehensive, sophisticated and risk-sensitive approach for banks to
calculate regulatory capital. The proposals will enable banks to align
regulatory requirements more closely with their internal risk
measurement and to improve operational processes.
Forward thinking institutions recognise that the Accord also provides a
unique opportunity to modernise and upgrade their overall risk
practices and risk infrastructure, specifically for credit and operational
risk. For these banks, Basel II means more than compliance; rather it
denotes the opportunity to achieve distinct competitive advantage in a
tight global market.
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New Charge for Operational
Risk
Basel II incorporates a new proposed capital charge for
operational risk, also incorporating three approaches.
These are the Basic Indicator and Standardised
Approaches as well as three Advanced Measurement
Approaches (AMA). There are regulatory capital
reduction incentives for banks to move to the more
sophisticated approaches. An emerging development
is that qualitative process review and improvement will
be required as the ticket of admission to be allowed
to use either the Standardised or one of the Advanced
Measurement Approaches. Advanced analytics applied
to loss data will not, in and of itself, be sufficient to
achieve a reduced regulatory capital level.
SunGard has developed the Operational Risk Pyramid
to illustrate the 5 levels of operational risk that should
be addressed over time for a systematic approach.
SunGard offers many tools to support a banks
operational risk strategy including solutions that
provide straight-through processing, electronic
confirmation matching tools and automated collateral
management systems, to name just a few. SunGard
also provides business continuity services that
facilitate operational resilience. We also provide the
consulting expertise to help clients establish their
operational risk strategy.
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Loss
Data Collection
KeyRiskIndicators
ControlandRisk SelfAssessment
OperationalProcesses
Analytics
The Operational Risk Pyramid
Solutions for Basel II
SunGard recognises that the roadmap to Basel II
compliance is unique for every client while, at the
same time, there are certain common areas that are
being addressed across many clients.
We offer an integrated suite of solutions that can form
the centrepiece of a Basel II compliant infrastructure.
Our Basel II solutions incorporate:
Credit risk solutions for banking and trading book
Comprehensive data management solutions
Operational risk consulting and review
Availability services for operational resilience
Extensive Basel II consulting services.
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BASEL I I SOLUTIONS
For more information on how we can help your bank gaincompetitive advantage while meeting the Basel II
proposals, contact:
SunGard Trading and Risk Systems
33 St Mary Axe
London
EC3A 8AA
Tel: + 44 (0) 207 337 6000
Fax: + 44 (0) 207 337 6010
www.risk.sungard.com
e-mail: [email protected]