Algorithmics today announced that Intesa Sanpaolo, a leading financial institution in Italy, has implemented the Algorithmics' solution for credit regulatory capital management to calculate the incremental default risk charge (IDRC), a key element of the specific risk charge under Pillar 1 of Basel II.
Paolo Sironi, Head of Counterparty Credit Risk at Intesa Sanpaolo said, "We already use Algorithmics to assess spread risk in our fixed income portfolios. We see this as a logical extension of our existing system for estimating, communicating and controlling risks. We incorporate the results for economic capital purposes, and plan to include them in our regulatory compliance programme at the appropriate time. Algo Credit Economic Capital provides us with unique features helping to assess the event risk associated with a comprehensive portfolio of fixed income, default swaps and CDO positions, thereby producing a coherent measure for the incremental default risk charge.
"With Algorithmics' sophisticated and proven risk solutions, we are able to access best-practice techniques to help us achieve compliance in a manner that can be leveraged for management purposes. We appreciate the advanced options, scalability and integrated aspects of the product."
Ben De Prisco, Head of Capital Analytics at Algorithmics, said, "Intesa Sanpaolo has been a long-term development partner and user of Algorithmics' solutions. We're pleased to have extended our relationship to assist them in addressing this important aspect of risk.
"Intesa Sanpaolo is looking to take advantage of many unique aspects of Algo Credit Economic Capital, as it relates to the IDRC, including its ability to comprehensively handle the myriad of trading book products subject to an incremental default charge. The comprehensiveness of the solution not only allows our clients to support regulatory compliance, but also extends the scope to fully integrated risk management and monitoring, planning and budgeting."
Separately, Algorithmics has today announced the release of a new Collateral Reconciliation solution for collateral groups seeking to reconcile their portfolio of exposures. Fortis Bank SA/NV has already installed the solution, which provides participants in the derivatives markets with an automated tool for reconciling over the counter portfolio positions.
Algo Reconciliation automatically identifies mark to market differences in portfolio valuations between counterparties, frequently allowing disputes to be reconciled within minutes.
Richard Barton, Director, Product Management Algorithmics Collateral said, "This product offers a business intuitive tool to support a more proactive approach to reconciliation, which has the potential to change the way people think about this problem. Currently, derivatives collateral management suffers from a very painstaking and slow portfolio reconciliation process in which daily disputes have to go unresolved, thus increasing operational risk. The speed of our innovative approach means disputes can be minimized, thus reducing our clients' risk."
Sabine Depresseux, Manager at Fortis Bank added, "We are very excited about this new solution which was installed within 4 days. The product intuitively makes sense and is easy to use. We wanted to be able to improve reconciliations of large portfolios and this allows us to quickly match most of lines and concentrate then on difficult cases."
Benefits of the new solution include:
- The ability to effortlessly import excel files for each Principal and Counterparty's trades without the need to manually manipulate files.
- Easily identify where trade booking discrepancies and/or MTM differences exist.
- Quickly create manual matches from a quality list of system suggested matches.
- Identify high priority discrepancies between you and your counterparty.
- Create useful reports which can assist in resolving identified discrepancies.
Richard Barton noted, "As the financial markets become more complex, organizations increasingly require viable collateral reconciliation tools to support their derivatives operations. This becomes particularly crucial in times of extreme market volatility. This new solution provides an intuitive and effective tool for business users to proactively identify the need for, set up and run a high-speed reconciliation, matching transactions across or within organizations."