DZ BANK, Germany’s third largest bank by asset size, is the central institution for about 1000 co-operative banks and their 11,000 branch offices. To deliver more efficient utilization of collateral, minimize the costs of collateral management and lower its operational risk, DZ BANK worked with Sapient Global Markets to optimize and automate the collateral allocation process. This project began with a proof of concept, using anonymized production data, to create an in-depth system assessment and find a platform that could fulfil both collateral function and IT infrastructure requirements.

The joint DZ BANK and Sapient project team utilised an agile approach to integrate the solution into the DZ BANK IT environment, requiring complex data sets and multiple interfaces to up- and downstream systems. DevOps methodologies were used to ensure a close collaboration between the different IT teams and adjust the solution to quickly meet the exact business requirements.

Regular incremental Go-Lives allowed for immediate bug fixing and decreased overall project risk. The early identification of issues, dependencies and potential risks in the different sprints reduced the go live to less than six months.

“With this project, we had the challenge to add additional functions and technology to an existing process and IT landscape. The expectation from Group Treasury was to deliver this in an ambitious timeline. With the implementation of the collateral optimization solution we focused on our strengths in project management and together with the collateral expertise from Sapient Global Markets we planned and delivered excellent work on-time and on-budget,” said Stefan Nagel, Group Lead IT Project Management Capital Markets at DZ BANK.

“The successful completion of this project was founded on the excellent planning, scoping and collaboration in the pre-study, where we identified critical issues for system selection and success criteria together with DZ BANK,” said Bernd Harnisch, Vice President Business Consulting, Sapient Global Markets.

The implementation has delivered a number of significant results. Annual collateral funding cost savings as signalled in the proof of concept phase have already translated into collateral funding cost savings. Fully automated post-trade collateral optimization processes auto-collateralize margin calls and send suggestions of collateral substitutions to DZ BANK’s Group Treasury division. Remaining manual insertions have been removed and an intraday market data delivery has been implemented. Group Treasury is now able to apply different market scenarios with negative interest rates as well as run multiple future simulations and market scenarios.

“FIS APEX Collateral provides our Collateral Asset Management with a highly sophisticated support system. Due to the automation the system offers, we enhanced the workflows within our collateral management setup. In addition we are able to identify optimal choices thereby taking into account not only the specific funding cost of a given collateral but also other factors like negative interest rates and transaction costs affecting these choices.” added Michael Schneider, Department Head Liquidity/Collateral Management, DZ BANK.