Implementation of BALM
Background Despite recent financial turmoil, the economy of Qatar has maintained a stable growth rate. Much of this can be attributed to strict regulation and supervision by Qatar Central Bank and the Asset-Liability Management Committees of banks. As a result, banks have to measure and manage Liquidity and Interest Rate Risk, and analyze various scenarios and ratios for regulatory reporting on an on-going basis. In addition, the ALCO at IBQ sets the level of risk tolerance and imposes over all threshold limits.
Challenges
IBQ had an in-house Microsoft Excel based solution that catered to ALM requirements. However, the drawbacks of this solution were:
- IBQ was not able to generate requisite ALM reports and ratios.
- ‘What if’ scenarios could not be modeled
- Data entry and calculation were manual. Data was sourced from various transaction systems like Core Banking Treasury, and Microsoft Excel.
To conclude, there were various difficulties faced by the bank. In addition there was a high possibility of human error, and the time taken to generate these reports was unduly long. This made monitoring liquidity and interest rate risk an up-hill task. Informed decisions could not be taken on the basis of the reports generated by the existing ALM solution.
Solution
As the existing Microsoft Excel based solution could not meet IBQs requirements, IBQ sought to implement an integrated ALM solution. As part of the selection process multiple ALM solutions were evaluated by IBQ, and BALM, Surya’s ALM solution, was adopted by IBQ for implementation.
A Brief on BALM implementation
BALM was implemented in IBQ in 2012. Implementation was completed in a short span of nine weeks and BALM went live in fourteen weeks from the start of the System Study phase.
Results
With BALM in place, IBQ now has a clearer picture of its risk positions. Some of the business objectives that were met with BALM are:
- Risk Managers now enabled to precisely analyze the impact of a wide variety of business decisions on the bank’s balance sheet.
- Risk Managers now are not only able to measure changes in Net Interest Income and Margin with changes in macro-economic factors, but can also forecast the NII and Margin.
- Compliance with regulatory norms has been enhanced with increased accuracy and consistency of data and assumptions.
Functional objectives that were met with BALM:
- BALM has enabled interface with all data sources thus reducing significantly the time required to upload, aggregate and validate data. Processing of data is done on a daily basis with throughput time of 15 minutes.
- Scenario Analysis helps to simulate various ‘what if’ situations by applying multiple transformation functions on native and scenario data.
- Trend Analysis helps to study behavior of products and ratios over a period of time. Key Ratio Builder enables users to create and monitor tolerance limits of multiple ratios.
Surya Advantage
With a view to meeting users’ needs and convenience, our Solutions are developed for deployment either as an integrated suite of products, or selectively on a modular basis, as required by financial institutions. The former option reduces time and costs of implementation, while the latter permits users to adopt solutions sequentially, matching implementation to their incremental needs and priorities.
