CLIENT CASE STUDY


Major North American bank: Basel II compliance - Risk management

Accenture helped a major North American bank to improve its risk management practices and ensure compliance with Basel II standards.

Overview

This client is one of the Top 10 banks in North America with assets in excess of $175 billion. They are a leading provider of deposit, credit, trust and investment services.

Opportunity
This bank is committed to a rigorous and disciplined approach to managing risk.

Since the “credit crunch” began, banks have come under increased pressure to maintain a strong balance sheet and more effectively manage their risk in order to retain the confidence of regulators, shareholders, institutional lenders, analysts and depositors. Regulations such as Basel II, the international standard outlining the amount of capital banks must put aside to guard against financial and operational risks, were designed to ensure the health and viability of the financial system.

While the bank is not required to comply with Basel II (they do not meet the assets threshold), they decided to adopt the new standards voluntarily as part of their broader enterprise risk management strategy. By doing so, they expect a range of benefits: decreased financial and operational risk, a more accurate understanding of their customers’ risk profiles, improved insight into their financial holdings and exposures, and the ability to measure their risk management practices against the international standard. 

Solution

Accenture is unique in its ability to combine specialized industry knowledge with data management expertise to help its clients transform their risk management operations—how they assess, price, manage and mitigate risks.

Accenture partnered with the bank to manage and deliver the key components of their $200 million-plus enterprise risk management transformation. Accenture’s involvement spanned five key areas:

Overall Program Management

  • Accenture served as the lead systems integrator and program manager for the transformational effort, which was the client’s largest program.

  • In addition to schedule, resource and cost management, Accenture was responsible for providing weekly updates to the program’s Executive Steering Committee, which included the chief financial, information and risk officers of the bank.

Basel II Rules and Regulations

  • Finance and performance management specialists from the United Kingdom, Ireland, South Africa, the United States and Canada helped define change management solutions in line with the bank’s interpretation of the final rules.

  • Accenture documented the implications for the client’s business, managed and executed organizational changes in order to ensure compliance and also formulated the reporting solutions required.

Credit Data Provisioning

  • Accenture managed and executed all aspects of the design, development and population of the client’s enterprise data warehouse and reporting data mart from key lending systems, including the provisioning of five years worth of historical data.

  • The work was completed leveraging data management and delivery experts from our US consulting workforce combined with our Accenture Delivery Center in Hyderabad, India.

Financial Data Analytics

  • Accenture designed, developed and populated a financial data warehouse to provide a comprehensive, integrated view of risks across numerous financial dimensions.

  • Accenture defined and provisioned the data required to calculate regulatory capital requirements under the Basel II specifications.

  • Accenture designed and developed reports to meet the Federal Reserve’s Basel I and II regulatory and compliance guidelines.

Risk-Adjusted Profitability

  • Accenture designed and delivered a solution to calculate key risk adjusted performance metrics (based on NIACC, RAROC, GRAROC, and SPROC) to enable the bank to assess performance across the enterprise at the instrument level.

  • Accenture developed new capabilities at the bank to perform restatements at the instrument level to accommodate financial or organizational events and enable the tracking of financial changes.

Results

In bringing together assets and resources—industry insights, leading capabilities in technology, delivery management, process expertise and deep financial services experience—Accenture partnered with the bank to help them achieve their goals and objectives for their enterprise risk management program, including:

  • Transferring Basel II business skills and knowledge to bank personnel and ensuring all practical implementation approaches to Basel II gaps were defined

  • Provisioning credit risk management data from commercial and retail lending origination, servicing and default management solutions

  • Designing and developing a credit reporting data mart that analyzes 600-plus key credit attributes across 30-plus risk management dimensions

  • Successfully converting more than 300 million loan records

  • Designing and implementing a finance data warehouse and associated data quality controls enabling the storage of high quality financial instrument data from across the enterprise

  • Configuring and implementing a capital calculation engine, which calculates risk-weighted assets across the enterprise as well as the corresponding Basel II regulatory capital values and reports

  • Sourcing data from 15-plus systems to deliver all inbound and outbound ETL code to the Financial Data Warehouse

  • Developing RAPM enrichment calculations to analyze profitability at the individual product, portfolio and officer level, and compared the risk-adjusted return against the bank’s cost of capital

  • Delivering all required supplemental schedules based on Basel II final rule

Industry & topics highlighted

Financial Services