NIBC gains a tighter grip on asset liability management

Supporting detailed scenario analysis with IBM Algo Asset Liability Management

Published on 11-Feb-2013

"Instead of occupying our analysts with days of data-gathering, the system provides in-depth analysis of multiple scenarios within just a few hours. We can make decisions based on the latest information at a much more detailed level, and with much more confidence in its accuracy." - Marcel de Kler, Head of Market Risk Reporting, NIBC

Customer:
NIBC

Industry:
Banking

Deployment country:
Netherlands

Solution:
Algorithmics Solutions, BA - Business Analytics, BA - Risk Analytics

Overview

NIBC is a bank that offers both corporate and consumer banking services. Based in the Hague in the Netherlands, it has offices in London, Frankfurt, Brussels and Singapore. In 2011, the bank employed 664 people, achieved revenues of €282 million and profits of €68 million, and was managing loans worth €9.1 billion and mortgages worth €8.7 billion.

Business need:
In an economy where liquidity is less abundant and credit more expensive, NIBC realised that it needed to gain tighter control of asset liability management in order to protect its interest income and maintain its profits.

Solution:
NIBC implemented IBM® Algo® Asset Liability Management, which complements its existing suite of IBM Risk Analytics software and provides detailed daily reports on various possible risk scenarios.

Results:
Automation reduces the reporting cycle from days to hours.

Benefits:
Moving from bi-weekly to daily reporting helps NIBC react faster to changing circumstances. Scenario analysis improves contingency planning.

Case Study

NIBC is a bank that offers both corporate and consumer banking services. Based in the Hague in the Netherlands, it has offices in London, Frankfurt, Brussels and Singapore. In 2011, the bank employed 664 people, achieved revenues of €282 million and profits of €68 million, and was managing loans worth €9.1 billion and mortgages worth €8.7 billion.

Growing need for risk analytics
NIBC’s corporate banking business focuses on financing, advising and investing for large private and public sector projects in areas such as shipping and infrastructure. Although this means that the total number of loans that need to be managed is relatively low, each loan is highly complex in terms of legal arrangements, collateral, securities and options. To help understand the many factors that can affect the value, income and profitability of these loans, the bank has deployed a sophisticated risk management platform, based on a suite of IBM Risk Analytics software.

Marcel de Kler, Head of Market Risk Reporting at NIBC, comments: “Over the past decade we have deployed IBM Algorithmics solutions for market risk, counterparty risk and credit risk, and we have built up considerable experience with these solutions. It also helps that we have a strong relationship with the support and project management teams, at first from Algorithmics and now from IBM. We were pleased when IBM acquired Algorithmics because both companies have a reputation for stable, high-quality software, and our experience of working with them has been great.”

Gap in the armour
Jurgen Peters, Head of Asset Liability Management, says: “The Risk Analytics software that we had deployed gave us a firm grip on risk in most aspects of our business, but there was still one gap in our armour. In the aftermath of the global financial crisis, liquidity is less abundant and credit is more expensive. As a result, banks like NIBC need even tighter control of the risks related to their assets and liabilities in order to stabilise interest income and maintain profits.

“Our approach to risk reporting in these areas was still based on spreadsheets, and it could take days to gather and check all the information required for even basic reports. As a result, we could only create reports on a bi-weekly basis, and they didn’t really offer the level of detailed analysis that we needed. We wanted a better solution.”

Finding the final piece of the puzzle
NIBC decided to fill in the missing piece of the puzzle by implementing IBM Algo Asset Liability Management, which would complement its existing solutions and create a truly comprehensive risk management platform.

Marcel de Kler states: “Just like all the other Risk Analytics projects we have worked on, it was a quick and clean implementation. The expertise of our own in-house team and the IBM consultants was impressive, and we were able to complete the project on budget and within a reasonable timescale.”

Detailed analysis of multiple scenarios
IBM Algo Asset Liability Management provides a framework that automates the production of asset and liability risk reports, and provides much more detailed insight into areas such as liquidity risk, interest income, credit spread income, and many others.
As well as performing risk forecasting calculations based on the current economic situation, the solution also enables scenario analysis, which helps NIBC predict the effects of rising or falling interest rates and other important factors. This allows the bank to devise contingency plans for many different situations, and create hedging strategies to minimise risk and stabilise cash flow.

Expecting the unexpected
“It’s almost impossible to say how much effect better asset liability management has on our financial results, but now that we are able to measure and control the risks, we can steer the company more effectively through the current difficult economic conditions,” comments Jurgen Peters. “Financial markets can be unpredictable, but the ability to prepare for different situations helps us hedge our positions and avoid surprises.”

Marcel de Kler adds: “The other important point about the new solution is that it gives us the results much more quickly. Instead of putting together bi-weekly updates based on complex, error-prone spreadsheets, we have a daily report that is generated automatically based on accurate data. Instead of occupying our analysts with days of data-gathering, the system provides in-depth analysis of multiple scenarios within just a few hours. As a result, we can make decisions based on the latest information at a much more detailed level, and with much more confidence in its accuracy.”

Ultimately, the solution helps NIBC react quickly to changing market situations, and identify and mitigate risks across its balance sheet. In the long term, this should contribute to safeguarding the bank’s interest income and maintaining profitability at a stable level, even in difficult economic conditions.

About IBM Business Analytics
IBM Business Analytics software delivers data-driven insights that help organisations work smarter and outperform their peers. This comprehensive portfolio includes solutions for business intelligence, predictive analytics and decision management, performance management, and risk management.

Business Analytics solutions enable companies to identify and visualise trends and patterns in areas, such as customer analytics, that can have a profound effect on business performance. They can compare scenarios, anticipate potential threats and opportunities, better plan, budget and forecast resources, balance risks against expected returns and work to meet regulatory requirements. By making analytics widely available, organisations can align tactical and strategic decision-making to achieve business goals.

For more information
For further information please visit ibm.com/business-analytics

Products and services used

IBM products and services that were used in this case study.

Software:
Algo Credit Manager, Algo Market Risk, Algo Collateral, Algo Asset Liability Management

Service:
Software Services for Business Analytics

Legal Information

© Copyright IBM Corporation 2013. IBM Nederland hoofdkantoor, Johan Huizingalaan 765, 1066 VH Amsterdam. Produced in the Netherlands. February 2013. IBM, the IBM logo and ibm.com are trademarks of International Business Machines Corp., registered in many jurisdictions worldwide. Other product and service names might be trademarks of IBM or other companies. A current list of IBM trademarks is available on the web at: www.ibm.com/legal/copytrade.shtml. Algo, Algo Market, Algo Credit and Algo Collateral are trademarks or registered trademarks of Algorithmics, an IBM Company. This document is current as of the initial date of publication and may be changed by IBM at any time. Not all offerings are available in every country in which IBM operates. The client examples cited are presented for illustrative purposes only. Actual performance results may vary depending on specific configurations and operating conditions. THE INFORMATION IN THIS DOCUMENT IS PROVIDED “AS IS” WITHOUT ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT ANY WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND ANY WARRANTY OR CONDITION OF NON-INFRINGEMENT. IBM products are warranted according to the terms and conditions of the agreements under which they are provided. The client is responsible for ensuring compliance with laws and regulations applicable to it. IBM does not provide legal advice or represent or warrant that its services or products will ensure that the client is in compliance with any law or regulation.