Case study basel compliance solution banking luxoft for a top ten global investment bank
For more information about Luxoft, visitwww.luxoft.comwww.luxoft.com/financial-services/case studyBasel II Reporting andCompliance SolutionSummary13.09.2012Develop a system for improved calculation and reporting of risk-weightedassets (RWA) for Basel II compliance.uu Client: A top ten global investment bankuu Business Area: Regulatory Reporting and Compliance, Risk Management,Middle Officeuu Asset Classes: Commodities, Equities, Equity Derivatives, Fixed Income, FIDerivatives, FX, Loansuu Technology Set: Oracle, Informatica, J2EE, Cognosuu Integration: Worldwide trade and valuation data providers; accounting,regulatory and risk management applicationsuu User Profile: Finance and Financial controluu Geography: Worldwideuu Relationships Status: Ongoing ODC, T&Muu Services Provided: Full cycle: Business analysis, Development, QA/Testing,Maintenanceuu Team Size: 30+ team members (Luxoft)uu Duration: 3+ years development and ongoing maintenance
Business ChallengeLuxoft Delivered SolutionChanges to the Basel II risk framework in 2008 compelled the bank to beginan initiative to upgrade its risk-weighted assets calculations and reportingto comply with the new regulatory requirements and for better capitalmanagement to support trading activities.The bank’s existing RWA processes were highly manual and timeconsuming,limiting the ability to actively manage projected RWA and requiringsignificant and unprofitable capital buffers in order to be aligned withregulatory requirements.The bank recognized the need to automate data collection to support thenew risk calculation and to facilitate timelier reporting to achieve the mainstrategic objective to lower capital requirements by:uu Implementing a more sophisticated risk calculation modeluu Providing for more frequent revaluationTo support the strategic goal, the technology solution had to meet thesehigh-level objectives:uu Automated data collection of all attributes required for RWA calculationmaintained in a central, unified repositoryuu Increase the frequency of the Basel II RWA calculation from monthly toweeklyThe Luxoft team used an iterative approach to deliver critical businessfunctionality faster. The following features were deployed on a monthlyrelease schedule:uu Implementation of a unified data repository for consistent RWAcalculation and reportinguu Automated, consolidated data collection for trade capture and valuationinto a single, straight-through processuu Validation and monitoring of all incoming data using rule-based analysisfor quality and exception alerts02Luxoft - Case Study
03Luxoft - Case Studyuu Web-based interface for manual reconciliations and adjustments to dataquality exceptionsuu Multiple file formats are accepted for inbound data feedsuu Customized, flexible, downstream reporting tools for credit risk and IFRS7 disclosuresLuxoft successfully built a comprehensive, flexible, and scalable solutionto that would allow for the addition of new upstream and downstreamsystems with minimum effort and cost. The main technologies applied wereInformatica for ETL, Oracle databases, a Java coding platform, and Cognosfor reporting. Despite the complex organizational structure of the projectteam consisting of bank employees, multiple vendors and the Luxoft team,the project was delivered on time and within budget.Figure 1:System Architecturefor Basel IICalculation andReportingMESSAGEBASED FEEDSMIXEDBASED FEEDSFILEBASED FEEDSFTPSERVERTABLE(1) TABLE(2) TABLE(N-1) TABLE(N) PRE-STAGINGAREA(TEXT, DATA,SOURCE SPECIFICSTRUCTURE)COMMONSTAGING AREA(TYPIFIED DATA,SOURCE SPECIFICSTRUCTURE)IDS(INBOUDDATA STORE)(FCL, DATASTRUCTURE)ODS(OUTBOUNDDATA STORE)TABLE(1) TABLE(N-1) TABLE(1) TABLE(1)DOWNSTREAM VIEVS DOWNSTREAM SLICESAI2AI2FEEDCONSTRUCTIONLAYERFEED HALDER(2)CORE FIELD LIST SPECIFICATION (CFL)VALIDATIONFEED STUBMSGFEED HALDER(2)FEED STUBMSGFEED HALDER(N)CHUNKS GCDS+TE
04Luxoft - Case StudyBenefitsCustomer FeedbackWith Luxoft’s technical expertise and advanced business domainknowledge, the client realized the following benefits:uu Lowered capital requirements resulting from the transition to a Basel IIrisk model and more frequent revaluationuu Significantly improved data quality and availability by removing manualprocesses and providing rule-based governance of the incoming datauu Substantially improved capacity for both current and future businessneeds with a flexible, scalable, and costeffective architectureuu Boosted performance and facilitated better decision-making viastraight-through processing of trade capture andvaluation dataDetailed feedback will be provided on request.