To further its Basel Capital Accord (Basel II) compliance strategy, Banque Populaire (Paris, 5.7 billion euros in assets in 2002) has implemented Fair Isaac's (San Rafael, Calif.) Blaze Advisor rules management technology. The financial institution utilizes the software to develop credit risk management policies for its consumer and business portfolios.
In preparation for the Basel II compliance deadline, the bank first sought vendor proposals for risk management solutions in April 2003. Two months later, after reviewing a prototype of the Fair Isaac offering, Banque Populaire chose the vendor's Blaze Advisor technology, according to Francine Febvre, the bank's Basel II manager. The new technology allows the bank to apply business rules in its automated applications, including credit scoring, Febvre says.
Prior to implementing Blaze Advisor, Banque Populaire conducted credit scoring with a Java-based application that was problematic, Febvre says. "We had two major problems," she explains. "First, the intervention of computer programmers was necessary for the evolution of the scores. Second, programming costs were too high."
And business analysts were not involved in the credit scoring process, she adds. To be prepared for Basel II compliance, the bank needed a more flexible solution. "We also needed to implement scores built with human experience - which is written in rules - and not only based on algorithms," she says. "This was not possible by using only traditional programming techniques." Blaze Advisor allows the bank's business analysts to develop and update risk management applications as international regulations change.
Banque Populaire also sought to cut costs with the implementation of the new business rules system. "We wanted to reduce our development and maintenance costs and allow users to easily modify the parameters of the scores," says Febvre. To accomplish this, the new solution needed to integrate seamlessly with the bank's existing technology environment, which includes Unix, WebSphere, Java and DB2, among other platforms, she adds.
Although the technical implementation was completed without any glitches, Febvre says the bank should have pushed analysts to practice working with the application during the implementation. "We should have involved users earlier in the process," she says. Because the technology is still new to users, there is a significant learning curve. "Computer engineers must now transfer their knowledge to users. We did not spend enough time to design a knowledge-oriented system, and we now have to review parts of our developed applications to make them more evolutionary."
As a result, Banque Populaire has not yet realized the full potential of Blaze Advisor. For now, the solution is used by computer programmers - not the business analysts involved in the credit scoring process. "The original goals will be met when Blaze Advisor will be used by [analysts], and not only by computer engineers," says Febvre. "The reduction of costs will be significant when this new technology will be used in other projects."
The flexibility of the Fair Isaac solution, however, has allowed Banque Populaire to reduce programming time - by as much as 30 percent, the vendor asserts.
Institution: Banque Populaire (Paris).
Assets: 5.7 billion euros.
Business Challenge: Comply with Basel II capital requirements and involve business analysts in credit scoring.
Solution: Fair Isaac's (San Rafael, Calif.) Blaze Advisor rules management system.