The IT&C and Financial & Banking
Convergence
Bucharest 29 October 2003
The Banking governance system and its implication regarding
IAS and Basel II – the vision of Elsag Finance Solutions
Carla Noya
Mkt&Communication Manager
Elsag Finance Solutions
Elsag Spa
[email protected]
Finance Solutions
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Our future won’t be any longer the same of the past…
Reference operator in the Italian Information Technology, with
about 3.000 employees and 420 mil/Euros turnover in 2002,
belonging to one of the most solid industrial Italian groups –
Finmeccanica - Elsag projects, carries out and manages
information solutions and services.
Elsag considers absolutely strategic the Finance market and for
this reason created the division Elsag Finance Solutions
specialised in products and solutions for all the financial
institutions, the reference partner not only for the financial
core business.
Innovation and evolution capability do not change what is the
fundamental role of Elsag: to provide Information Technology,
one of the most important enabling factor for the modern
company business processes.
Finance Solutions
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The Group
100%
Elsag Gest
Elsag Banklab
100%
83%
Banks
Elsag ERP
Elsag Backoffice Services
50%
Shoplà
Banca Intesa
Banks
Ales
51%
65%
51%
Alitalia
Private investors
Elsag STI
Banks
51%
Elsag Solutions
51%
50%
Italdata
Ingegneria dell’Idea
Private investors
Finance Solutions
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The Company
HUMAN RESOURCES AND STRUCTURE
2,926 employees at
31.12.2002
Staff 10%
Marketing
3%
9% Installation and implementation
9% Project concept
and services
10% Project management
and services
24%
Service delivery and
customer assistance
35% Development
Main and secondary offices
Genoa
Ascoli
Florence
L’Aquila
Piacenza
Venice
Rome
Benevento
Foggia
La Spezia
Reggio C.
Bucharest
Milan
Bergamo
Frosinone
Palermo
Turin
Villingen
Naples
Brescia
Gorizia
Perugia
Varese
Riyadh
Finance Solutions
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EFS
The Elsag Finance Solutions Division
Finance Solutions
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The new Elsag Finance Solutions (EFS) division
On June 2003 Elsag had approved a new industrial plan to reinforce of the company into the
FINANCIAL MARKET. The plan provides:
• the creation of the division EFS
• a new management
• investments for 10 millions Euro in the next 2 years
• the consolidation of our presence on the banking market (with more than 100 active
references) with a particular focus on the top ten Italian and International Groups
•The reinforce of our presence in the developing countries market(Elsag has developed the
entire information system of the Al Rajhi Banking & Investment - one of the major Saudi
financial institutions)
•The extension of the presence also in the insurance and parabanking market through the
development and integration of core solutions
Year 2002
Revenues 52,8 E/mln
Resources 380
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EFS for the financial market
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The market
Banks and financial institutions opearting on international
financial markets are facing the challenges of rapid
change, increasingly fierce of competition, reduced
margins and new technology, all at a time when customers
are becoming more demanding.
So one pf the keys to success in this environment is an
ability to respond to the market demands, anticipate
customers needs and use information to maximise profit.
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The market: some of our customers
Finance Solutions
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Our offering
The knowledge of the needs of the
•Solutions
financial environment, the large
•Consultancy
technological competences, the
•Projects
solidity, make EFS the startegic
•Services
institutions
number of projects developed, the
partner for all the financial
•System Integration
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The theme of today
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Major functional limitations of the previous accord(1988) …
1.
The lack in considering the different creditworthiness of private
companies, all subjected to the same risk pondering (100%);
2.
The lack in considering the different risk grade implicit in the different life
of the residual debts;
3.
The lack in considering the different risk grade related to portfolios that
present a different grade of diversification;
4.
The limited consideration of the risk reduction effects related to policies of
hedging account with warrants or credit derivatives
Finance Solutions
Cfr. Prof. Caselli –Università Bocconi Milano
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… And the criticality in the information systems
• Objectivity
• Redundances
• Reliability
• Presentation architectures
• Timeliness
• Stratification of the extractors
• Qualitative data not usable
• Limited or not sufficient integrations
• Destructured processes
Information
Systems
• Mismatches in the customer segmentation between
executive and CRM systems
• Limited availability of historical data
• Limited matching between internal and external
data
• Limited use of data collected during the
preliminary investigation
• Limited integration between the Finance and
Credit areas
Executive
Systems
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The Elsag Finance Solutions’ vision
Design an architecture:
 Governable for its complexity
 Flexible for different levels of use and/or Countries target
 Adaptable to business models (investment optimization)
 Maintainable in the future
but, most of all
 Integrable in the production system
Back Testing
 Quickly usable and for this estimable
Simulations
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Integration with Basilea - IAS
“In financial institutions that will adopt the IRB approach, internal credit ratings
and evaluations of default and loss must have a crucial role in the authorisation
process of granting loans, risk management, internal capital allocation and
corporate governance functions. Rating and evaluation systems, drawn up only
with the scope to enable the bank institution to the IRB approach and used only to
provide input IRB, are not acceptable.”
(cfr. Basel Accord –406)
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Our methodology
Relialability
Analysis
Profiles
National Central Bank
Protocol
and/or
Company values
Analysis Model
Operations
Integration (coherency)
Functionality
Structured Management of
Processes and N.I. (WorkFlow &
Document management)
Solutions/semi finished products
• Definition of data to be acquired
• Collection and organisation of information elements
• Processing
• Integration
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Our vision of the project
The new scenario
Front Office
• Request
• Revisals/ Extensions
• Conditions
operations
Back Office
• Control
• Measurement
• Management
Positions/operations
Positions/operations
Integrated rating
system
Credit DB
Information
Providers
MEASUREMENT AND
EVALUTION PORTFOLIO
CREDITS
C.A. – F.V. – VaR MODULE
Delegation
system
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To Support the logical process …
Conditions
&
Pricing
Rating /
Grading
Monitor &
Warnings
Guarantees
Management
Portfolios
Credit Collection Management
Rating
Management
Definition &
&
Default
Up date
Monitor
Central Bank
Credit
Scoring
Conditions Risk-adjusted
Corporate
Customers
Retail
Customers
Small
Customers
Inquiry
& Grant
Managerial
systems
CRM
Management
IAS
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Relationships between customer segments and analysis paths
Customers oriented
towards relations
(Corporate)
Customers oriented
towards transactions
(Retail)
Methodical use of the external rating produced by
information provider on a base of sectorial, economicfinancial and trend data
Targeted examinations with
ad hoc report provided by
information provider.
Production of the internal
rating according to the Elsag
best practices shared with the
Bank
Small size Customers
(Small e Consumer credit)
Methodical and
mandatory use of
Targeted examinations
scoring
Methodical and mandatory
use of the internal rating
that integrates the external
rating according to the
Elsag designed best practice
path shared with the Bank
Internal Rating
(Grading)
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The inquiring
path
(WorkFlow)
The solution for the credits procedure
The
creditworthiness
judgments for
“Grading”
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The solution for monitoring the positions
The synthesis
model
The analysis
path
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The solution for credit portfolio management
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IAS 39 Credit Architecture
Management processes
Alimentation
Value Calculation Process
Info
Provider
• Standard data for surveillance of central bank.
• Additional data (Business / Rating )
Rates and currencies
Output for Business I.S.
RECOGNITION
Calculation engines
•
•
•
•
Fair Value
Actual Interest Rate
Amortized costs
Market rates
•Data loading in calculation engine
•Exposures
•Contract data (rates, deadlines,ecc.)
•Customer Data
•Rating
•Portfolio variables (sae, rae,
localization, ecc.)
•Aggregation calculation
•Parameters/Values Management
•Functions of file management
•Inquiry functions
•Data extraction for business I. S.
(Balance/General Accounting)
IMPAIRMENT
•Portfolios management
•Time series management
• PD Curve
•Impairment functions
•Analyticals
•Generals
Analysis & Reporting
Components external to the IAS project
Procedures that will be changed by the IAS project
a Finmeccanica company
Finance Solutions
Procedures directly touched by the IAS project
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IAS 39 Securities Architecture
GIANT
Central Finance
Department
Main Frame
Customers’
Operational procedures
Info
Provider
Information file
Daily Balance
Securities
(Sectorial analytical accounts)
Rating
• Ratios
BilG - Ledgers
(Asset, Investments, Passive)
Calculation engines
• Portfolios Management
• Impairment
• Accounting movements
generation
• Accounting and economic
covers and their efficiency
• Future projections
• Fair Value
• Amended cost
1
2
securities
Credits
Derivatives
Covers
3
• Chart of accounts
• Allocation
Management
• Analytical values
production
• Synthesis values
production
• Data production for
general accounts
General
accounts
4
5
DB
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Thank you for the attention
Carla Noya
Elsag Finance Solutions
[email protected]
Finance Solutions
a Finmeccanica company
© Elsag Spa 2002. Riservati tutti i diritti a norma di legge. Vietata la riproduzione