Basel II Reporting and Compliance Solution. Summary. For more information about Luxoft, visit

Transcription

1 For more information about Luxoft, visit case study Basel II Reporting and Compliance Solution Summary Develop a system for improved calculation and reporting of risk-weighted assets (RWA) for Basel II compliance. Client: A top ten global investment bank Business Area: Regulatory Reporting and Compliance, Risk Management, Middle Office Asset Classes: Commodities, Equities, Equity Derivatives, Fixed Income, FI Derivatives, FX, Loans Technology Set: Oracle, Informatica, J2EE, Cognos Integration: Worldwide trade and valuation data providers; accounting, regulatory and risk management applications User Profile: Finance and Financial control Geography: Worldwide Relationships Status: Ongoing ODC, T&M Services Provided: Full cycle: Business analysis, Development, QA/Testing, Maintenance Team Size: 30+ team members (Luxoft) Duration: 3+ years development and ongoing maintenance

2 Business Challenge Changes to the Basel II risk framework in 2008 compelled the bank to begin an initiative to upgrade its risk-weighted assets calculations and reporting to comply with the new regulatory requirements and for better capital management to support trading activities. The bank s existing RWA processes were highly manual and timeconsuming, limiting the ability to actively manage projected RWA and requiring significant and unprofitable capital buffers in order to be aligned with regulatory requirements. The bank recognized the need to automate data collection to support the new risk calculation and to facilitate timelier reporting to achieve the main strategic objective to lower capital requirements by: Implementing a more sophisticated risk calculation model Providing for more frequent revaluation To support the strategic goal, the technology solution had to meet these high-level objectives: Automated data collection of all attributes required for RWA calculation maintained in a central, unified repository Increase the frequency of the Basel II RWA calculation from monthly to weekly Luxoft Delivered Solution The Luxoft team used an iterative approach to deliver critical business functionality faster. The following features were deployed on a monthly release schedule: Implementation of a unified data repository for consistent RWA calculation and reporting Automated, consolidated data collection for trade capture and valuation into a single, straight-through process Validation and monitoring of all incoming data using rule-based analysis for quality and exception alerts 02

3 Web-based interface for manual reconciliations and adjustments to data quality exceptions Multiple file formats are accepted for inbound data feeds Customized, flexible, downstream reporting tools for credit risk and IFRS 7 disclosures Luxoft successfully built a comprehensive, flexible, and scalable solution to that would allow for the addition of new upstream and downstream systems with minimum effort and cost. The main technologies applied were Informatica for ETL, Oracle databases, a Java coding platform, and Cognos for reporting. Despite the complex organizational structure of the project team consisting of bank employees, multiple vendors and the Luxoft team, the project was delivered on time and within budget. Figure 1: System Architecture for Basel II Calculation and Reporting MESSAGE MIXED FILE FTP SERVER AI2 AI2 FEED CONSTRUCTION LAYER FEED HALDER(N) FEED HALDER(2) FEED HALDER(2) FEED STUBMSG FEED STUBMSG TABLE(1) TABLE(2) TABLE(N-1) TABLE(N) PRE-STAGING AREA(TEXT, DATA, SOURCE SPECIFIC TABLE(1) TABLE(N-1) TABLE(1) TABLE(1) COMMON STAGING AREA (TYPIFIED DATA, SOURCE SPECIFIC CORE FIELD LIST SPECIFICATION (CFL) VALIDATION CHUNKS GCDS+TE IDS (INBOUD DATA STORE) (FCL, DATA DOWNSTREAM VIEVS DOWNSTREAM SLICES ODS (OUTBOUND DATA STORE) 03

4 Benefits With Luxoft s technical expertise and advanced business domain knowledge, the client realized the following benefits: Lowered capital requirements resulting from the transition to a Basel II risk model and more frequent revaluation Significantly improved data quality and availability by removing manual processes and providing rule-based governance of the incoming data Substantially improved capacity for both current and future business needs with a flexible, scalable, and costeffective architecture Boosted performance and facilitated better decision-making via straight-through processing of trade capture andvaluation data Customer Feedback Detailed feedback will be provided on request. 04

5 About luxoft Luxoft, a principal subsidiary of IBS Group, is a provider of advanced application and software engineering outsourcing services for global and regional enterprises. Luxoft builds partnerships with its clients, such as Boeing, IBM, Deutsche Bank, UBS, Harman, Avaya, Alstom, and Sabre, based on the culture of engineering excellence, innovation, and deep domain expertise. Luxoft offers international delivery capability through its network of state-of-the-art delivery centers in North America, Eastern Europe, and Asia. Luxoft`s customers benefit from the right mix of technology skills, industry knowledge, proprietary processes and methodologies, and a choice of engagement models. For more information about Luxoft, visit Luxoft