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The Buzz on Basel II

Banks leverage enterprise management technologies to get head start on compliance.

While many banks are implementing new technology or upgrading existing systems specifically to comply with upcoming regulations, some technology executives are using current or new systems intended to support other areas of the bank in order to get a head start in the compliance game. By implementing enterprise management reporting systems and methodologies, some banks are noticing that by supporting other business areas, such as the organization of customer data, they are also preparing for future legislation, according to industry insiders.

By implementing a Web-enabled management tool, Chicago-based Harris Bank ($30 billion in assets) is now on the road to complying with the upcoming Basel II Accord. The bank used PeopleSoft's (Pleasanton, Calif.) Enterprise Management suite of applications, with BearingPoint's (McLean, Va.) EPMOne methodology, to upgrade its legacy computer systems, according to Bill Kragh, vice president, finance group, Harris Bank.

Kragh says the bank sought to automate manual processes and improve its business decision-making, financial analysis and profitability risk management in order to support its current growth. The implementation has given the bank enough resources to have a "leg up" in the future implementation process for Basel II, Kragh asserts.

The PeopleSoft solution allows Harris Bank to conduct multidimensional reporting and analysis across its 2,000 departments, 600 products and 8,000 accounts, according to Kragh. "The system is built at an instrument level and provides us a complete product view of our profitability," he says. "We believe we should be able to leverage this data for the implementation of Basel II."

"The way PeopleSoft can help banks is the increased granularity of the calculation of capital," says Michael Pugliese, managing director, BearingPoint. "It give banks a great way to capture and store granular information from loan and other systems to capture, store and report information to support Basel."

Banks eventually will need to utilize the same technologies that they are currently employing for other objectives to comply with Basel II, says Janice Horan, director of product marketing, Fair Isaac (San Rafael, Calif.), because there is no complete solution specifically designed for the regulation.

"Banks are concerned that they haven't found a Basel-in-a-box solution," she says. "Basel is so broad that it appears there won't be a Basel-in-a-box solution. Banks are using credit risk assessment so they can be used in the Basel capital calculations."

Cleveland-based KeyBank ($84.4 billion in total assets) is using technology designed for compliance with other regulations to prepare for the Basel II requirements. It currently utilizes an enterprise-wide system that equips the bank with Sarbanes-Oxley compliance capabilities, according to Chip Clarke, senior vice president, strategic analytics, KeyBank. "We have implemented it in a much broader way so that it becomes compliant with what we know of Basel," he says.

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