Oracle – A Basel II Approach 22 nd Feb 2006 1 A Basel II Approach by Alexandra Lederer-Ponzer...
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Transcript of Oracle – A Basel II Approach 22 nd Feb 2006 1 A Basel II Approach by Alexandra Lederer-Ponzer...
1Oracle – A Basel II Approach 22nd Feb 2006
A Basel II Approachby
Alexandra Lederer-PonzerOracle EMEA Risk & Compliance
Solution Centre
22 Feb 2006
3Oracle – A Basel II Approach 22nd Feb 2006
The Basel II Accord• Pillar I – Minimum Capital Requirements
• Credit Risk• Standardised Approach• Internal Ratings Based Approach
• for Non Securitisation Exposures• Foundation IRB + Advanced IRB
• for Securitisation Exposures• Ratings-Based Approach, Internal Assessment Approach (IAA), Supervisory Formula (SFA)
• Market Risk (unchanged)
• Standardised Approach + Internal Models Approach
• Operational Risk• Basic Indicator Approach• Standardised / Alternative Standardised Approach• Advanced Measurement Approach
• Pillar II – Supervisory Review• Transparency + Consideration of other Risk Areas (IRRBB, Liquidity Risk, …)
• Pillar III – Market Discsipline• Disclosure Reporting (Central Bank Reporting)
4Oracle – A Basel II Approach 22nd Feb 2006
Basel II Challenges for Banks
• Data Management• For Pillar I Regulatory Capital Calculations• For Pillar II Transparency and Other Risk Management Areas (IRRBB,
Concentration Risk, etc.)• For Disclosure Reporting (Central Bank Reporting) Availability of Data, Data Quality and Efficient Data Management are
KEY!
• Risk Analytics• Pillar I Credit, Market & Operational Risk Analytics to compute
Regulatory Capital • RW, RWAs, Regulatory Capital Computation• PD/LGD estimation for IRB Aproaches
• Economic Capital Calculation Requirements
• Reporting• Pillar III - Disclosure Reporting - Be compliant• Pillar II – Transparency Reporting, Auditing• Pillar I plus internal Reporting Requirements
6Oracle – A Basel II Approach 22nd Feb 2006
Oracle understands the FS Business...Oracle Financial Services Applications (OFSA)
DataIntegration
DataIntegration
Design and AdministrationDesign and AdministrationDesign and Administration
Meta DataMeta Data
InformationDelivery
(iPortal)
InformationDelivery
(iPortal)
OFDMOFDMGLGL
SyndicatedSyndicatedDataData
Operational Operational SystemsSystems
Risk Risk SystemsSystems
OFSAOFSA Other Other AnalysesAnalyses
ExternalExternalReportingReporting
PerformancePerformanceManangementManangement
InterConnect
Collect and Store
Calculate
Report
DataIntegration
DataIntegration
Design and AdministrationDesign and AdministrationDesign and Administration
Meta DataMeta Data
InformationDelivery
(iPortal)
InformationDelivery
(iPortal)
OFDMOFDMGLGL
SyndicatedSyndicatedDataData
Operational Operational SystemsSystems
Risk Risk SystemsSystems
OFSAOFSA Other Other AnalysesAnalyses
ExternalExternalReportingReporting
PerformancePerformanceManangementManangement
InterConnect
Collect and Store
DataIntegration
DataIntegration
DataIntegration
DataIntegration
Design and AdministrationDesign and AdministrationDesign and Administration
Meta DataMeta Data
InformationDelivery
(iPortal)
InformationDelivery
(iPortal)
OFDMOFDMGLGLGLGL
SyndicatedSyndicatedDataData
SyndicatedSyndicatedDataData
Operational Operational SystemsSystems
Operational Operational SystemsSystems
Risk Risk SystemsSystems
OFSAOFSA Other Other AnalysesAnalyses
Risk Risk SystemsSystemsRisk Risk SystemsSystems
OFSAOFSAOFSAOFSA Other Other AnalysesAnalyses
Other Other AnalysesAnalyses
ExternalExternalReportingReportingExternalExternal
ReportingReporting
PerformancePerformanceManangementManangementPerformancePerformanceManangementManangement
InterConnect
InterConnect
Collect and Store
Calculate
Report
7Oracle – A Basel II Approach 22nd Feb 2006
• > 200 customers use Oracle Financial Services Applications (OFSA)
• for 1. Data Management
2. Financial Management and Reporting
3. As a first step towards ‘Risk Adjusted Performance Management’ (RAPM)
Bank of Tokyo-Mitsubishi
Oracle has the Experience ...
8Oracle – A Basel II Approach 22nd Feb 2006
Basel II – complex or easy?
‚Reveleus Basel II Solution‘ is a flexible, easy to use solution for the computation of Capital Charges
9Oracle – A Basel II Approach 22nd Feb 2006
Enterprise Risk Management
EnterpriseFinancial
Performance
Treasury Analytics
Credit Risk
Operational Risk
Compliance
Management Reporting
Finance
Customer Insight Marketing
Specialized Analytics
Customer Lifetime Value Campaign Management Customer Segmentation Cross Sell / Up SellChannel Analytics Customer Profitability
Reveleus Basel II Solution
Reveleus ORTOS
Funds Transfer PricingAsset Liability ManagementMarket Risk Analysis *
Retail Credit Risk Analysis
Corporate Credit Risk Analysis
Product ProfitabilityOrganizational ProfitabilityCustomer Profitability
Funds Transfer PricingBudgeting and ForecastingGL Consolidation
Credit CardsMortgage
Reveleus Financial Services Analytics
11Oracle – A Basel II Approach 22nd Feb 2006
Pillar I : Capital Adequacy CalculationsPillar I : Capital Adequacy Calculations
Credit RiskCredit Risk Market RiskMarket Risk Operational RiskOperational Risk
Calculation of
Exposure
Calculation of
Risk Weights based on PD & LGD
Adjustment forCollateral Valuation
Adjustment forCredit
Mitigants
Netting Balance Sheet
Items
External / InternalRating Systems
Supervisory RiskWeights and LGD
Value at Risk
Interest RateRisk
Support for all 3 approaches
Basic Indicator Approach: Capital Calculated as a percentage of Gross Income
Standardized Approach: Line of Business Based Exposure Indicators
Advanced Measurement Approach: Capital computation as per LDA
Standardized ApproachInternal Ratings Based Approach (Foundation)Internal Ratings Based Approach (Advanced)
Standardized Measurement
Methods
Pillar II : Supervisory OversightPillar II : Supervisory Oversight Pillar III : Market DisciplinePillar III : Market DisciplineUsage of Metadata Transparency
Rules Based Engine
Capital Adequacy Reporting
Quantitative DisclosuresRisk Assessment Reports
Flexible Reporting
Qualitative Disclosures
Equity PositionRisk
Foreign ExchangeRisk
CommoditiesRisk
Treatment of Options
Calculation of
PD / LGD
Calculation of
RWA
Reveleus - Basel II Coverage
12Oracle – A Basel II Approach 22nd Feb 2006
Reveleus supports all Basel II Approachesfor Credit Risk
Non-Securitisation Exposures• Standardised Approach
• Collateral Handling & Optimisation• Simple and Comprehensive
• Internal Ratings Based (IRB) Approaches• Incl. Specialized Lending• Incl. Equity using PD/ LGD Approach• Incl. Equity using Simple Approach
Securitisation Exposures• Standardised Approach• RBA (Ratings Based Approach)• SFA (Supervisory Formular Approach)• IAA (Internal Assessment Approach
Capital Computation as per Basel I
13Oracle – A Basel II Approach 22nd Feb 2006
Reveleus Basel II Solution supports
Computation of Capital Charges for (see Q10)
• Credit Risk• See previous slides
• Market Risk• using Market Risk VaR inputs for the capital computation• For Standardised Approach with next Release 3.0 (May 2006)
• Operational Risk• For Basic Indicator Approach• For Standardised and Alternative Standardised Approach• Using Op Risk VaR inputs for AMA • Using Reveleus ORTOS for Op Risk Modelling and to track op risk data
by business lines, etc.
Computation of Qualifying Capital (Tiers 1, 2, 3)
Computation of Economic Capital
14Oracle – A Basel II Approach 22nd Feb 2006
Reveleus Basel II Solution
Multi-Jurisdiction capital computationEasy parameterisation of Approaches for multiple national
discretion overrides by business users
Multi-Entity capital computationsBased on different approaches per entity
Simultaneous capital calculations of the same portfolio based on different approaches
Multi Currency Transactions
Statistical estimation of PD and LGD
Stress Testing, Back Testing, Scenario Simulations
Collateral Optimisation
User Access in multiple languages
100% Web-based, using a user-friendly User Interface
15Oracle – A Basel II Approach 22nd Feb 2006
Reveleus Basel II Solution Components
BusinessUser
Baseline Run
Simulation Run
SimulationOutputs
BaselineOutputs
Exposure RulesExposure Rules
Collateral RulesCollateral Rules
Credit Mitigation Rules
Credit Mitigation Rules
Securitization RulesSecuritization Rules
RWA Computation Rules
RWA Computation Rules
Optimization Engine
Regression AnalysisRegression Analysis
Naïve BayesNaïve Bayes
Distribution FittingDistribution Fitting
OptimizationOptimization
PDEstimation
PDEstimation
LGDEstimation
LGDEstimation
Allocating Mitigants to Exposures
Allocating Mitigants to Exposures
Reveleus Unified MetadataCentralized Business Definitions – s, Metrics, Reports
Reveleus Data StructuresPre-Built Global Banking Data Model
Modeling Framework
Rules Framework
Run Framework
Applications
Models
Pillar IIReporting Templates
Pillar IReporting Templates
3rd Party Reporting Tool Support
Pillar IIIReporting Templates
Reporting Framework
ScenariosScenariosScenarios Filters
Filters
16Oracle – A Basel II Approach 22nd Feb 2006
Ratings
Maturity (M)
PD Calculation
LGDCalculation
NettingOff Balance Sheet
Ratings
NettingOff Balance
Sheet
K irb
CreditEnhancement
Level
Granularity
Thickness
Q-ValueMaturity (M)
Ratings
CREDITRISK
Rating
Reveleus – Capital Computations
17Oracle – A Basel II Approach 22nd Feb 2006
Reveleus Risk Solutions End State Vision
Enterprise RiskInfrastructure Reveleus Risk Applications
Reporting & Analysis
Security & Operational Framework
Transparency of Process, Models & Output
Internal Reporting& Analysis
Aggregated & Relational Reporting
Capital Adequacy Reporting
External Reporting
Local Regulator Reporting
ALM
Enterprise RiskRepository
CapitalComputation
Home/Host Reporting
PD / LGD Estimation
Credit Rating
RetailCredit Risk
Corp.Credit Risk
Market Risk
FTP
Reveleus Enterprise Risk
Reveleus Basel II Solution
Loan Systems
Collateral Systems
Information Vendors
TreasurySystems
General Ledger
Economic Capital
EDW
Rule/Run Framework
Enterprise Risk Business Metadata
Risk Based Pricing
RWAComputation
OpRiskData
Ops Risk
18Oracle – A Basel II Approach 22nd Feb 2006
Thank you !For further information
pls. contact
My personal note:
Basel II is about standard business rukes defined by BIS II and EU/CRD.
A standard solution provides ease of use and the necessary flexibility for business users to modify these business rules if required by the local regulator.