The UK's Portman Building Society is implementing technology from SunGard Trading and Risk Systems to support its retail credit risk management operations and comply with the Basel II Capital Accord.
Portman will use SunGard's Basel II Capital Manager product to comply with Basel II's Advanced Internal-Ratings Based (IRB) approach for credit risk. The software will replace Portman's existing spreadsheet-based capital calculation system.
The society will use the SunGard software to run Basel I and II calculations in parallel, for comparison and consistency checking purposes required under Pillar 1 of the accord.
As per Pillar 2, the product will provide stress testing analysis and validation reports required in order to support the supervisory model approval process that is a part of the Advanced IRB Approach. The software also supports the advanced economic capital allocation process that uses risk-adjusted performance measurement, as required under Pillar 2.
In accordance with the third and final Pillar of the Accord, Basel II Capital Manager provides reporting featuring a range of information on capital and risk numbers as well as risk management practices.
Mike Clark, Basel II program manager at Portman, says: "Unlike our previous spreadsheet environment, SunGard's Basel II Capital Manager will enable us to drill-down behind any number in a report to the see components of that calculation, and from these components, down to the source data behind them. This will help us to improve our efficiency, accuracy and automation."
SunGard says Portman will also use its software as the basis for developing new internal credit risk processes. This involves the segmentation of retail clusters as well as the generation of PD's (probability of default), LGD's (loss given default) and EAD's (exposure at default) for the relevant cluster and positions. Under the Advanced IRB Approach, Portman will use its own proprietary method to derive these input parameters for the regulatory and economic capital calculations.