Dear,
Recently I talked to an executive of a US Bank who wanted to discuss about Bank Analyzer capabilities.
Apparently he tried to get some information about the potential of SAP Bank Analyzer for fulfilling the requirements of the CAMELS Rating System, but he found some challenges for getting an answer.
CAMELS Rating System is a supervisory rating system for providing a holistic analysis of a bank’s condition. It was initially developed in the US but it’s been accepted in many other countries.
Actually, SAP Bank Analyzer covers quite well most of CAMELS requirements; let’s see those requirements in detail.
- Capital Adequacy
- Assets
- Management Capability
- Earnings
- Liquidity
- Sensitivity
Capital Adequacy is very well covered by SAP Components; Capital Requirements for Credit Risk are fully covered by the CRA module of Bank Analyzer, including Advanced IRB approach with full Historization capabilities in BA-Historical Database and integration with BS-Loans.
Lately, Basel committee in Banking Supervision has made some proposals for new requirements in counter-cycle provisions. Those requirements have been locally regulated in some European countries for years and we developed some enhancements to cover them 7 years ago (quite well supported by the Financial Database).
Capital Adequacy for market risk is an opportunity for improvement in Bank Analyzer; Value at Risk calculations are fully covered by Market Risk Analyzer of SEM Banking, and hopefully they will be supported by BA-Strategy Analyzer in future releases.
Operational Risk Calculations for Capital Adequacy are covered by SAP GRC.
Assets quality analysis is one of the strongest points of Bank Analyzer. Stress Testing, External and Internal Cost Analysis on Financial Transaction/Financial Instrument Level are fully covered.
Management Capability.- Bank Analyzer integration with other Netweaver components offers very good foundation for working on this requirement. I’ve personally worked in integration scenarios between Bank Analyzer and Balanced Scorecards; I’ll give you details in a future post.
Earnings.- This is very well covered by BA AFI, Profit Analyzer and its integration with the New General Ledger, and SAP Controlling modules.
Financial Planning and Financial Consolidation is very well supported by the integration between BA-AFI and SAP-BPC.
Liquidity.- Fully covered by SAP Liquidity Risk Management, including new Basel III liquidity requirements.
Sensitivity to Market Risk.- We have an opportunity for improvement here. We have some functionality available in BA-Strategy Analyzer, but we miss Market Data Generation and Simulation capabilities. Hopefully we’ll enjoy them in future releases.
In my opinion, with some limitations, Bank Analyzer is in a very good position for providing structured and good quality data for covering CAMELS analysis, and it’s the best option to build the foundation of regulatory reporting.
Lesson learned; developing great software is not enough, we need to improve the market recognition of its true value.
Looking forward to read your opinions.
K. Regards,
Ferran.
Recently I talked to an executive of a US Bank who wanted to discuss about Bank Analyzer capabilities.
Apparently he tried to get some information about the potential of SAP Bank Analyzer for fulfilling the requirements of the CAMELS Rating System, but he found some challenges for getting an answer.
CAMELS Rating System is a supervisory rating system for providing a holistic analysis of a bank’s condition. It was initially developed in the US but it’s been accepted in many other countries.
Actually, SAP Bank Analyzer covers quite well most of CAMELS requirements; let’s see those requirements in detail.
- Capital Adequacy
- Assets
- Management Capability
- Earnings
- Liquidity
- Sensitivity
Capital Adequacy is very well covered by SAP Components; Capital Requirements for Credit Risk are fully covered by the CRA module of Bank Analyzer, including Advanced IRB approach with full Historization capabilities in BA-Historical Database and integration with BS-Loans.
Lately, Basel committee in Banking Supervision has made some proposals for new requirements in counter-cycle provisions. Those requirements have been locally regulated in some European countries for years and we developed some enhancements to cover them 7 years ago (quite well supported by the Financial Database).
Capital Adequacy for market risk is an opportunity for improvement in Bank Analyzer; Value at Risk calculations are fully covered by Market Risk Analyzer of SEM Banking, and hopefully they will be supported by BA-Strategy Analyzer in future releases.
Operational Risk Calculations for Capital Adequacy are covered by SAP GRC.
Assets quality analysis is one of the strongest points of Bank Analyzer. Stress Testing, External and Internal Cost Analysis on Financial Transaction/Financial Instrument Level are fully covered.
Management Capability.- Bank Analyzer integration with other Netweaver components offers very good foundation for working on this requirement. I’ve personally worked in integration scenarios between Bank Analyzer and Balanced Scorecards; I’ll give you details in a future post.
Earnings.- This is very well covered by BA AFI, Profit Analyzer and its integration with the New General Ledger, and SAP Controlling modules.
Financial Planning and Financial Consolidation is very well supported by the integration between BA-AFI and SAP-BPC.
Liquidity.- Fully covered by SAP Liquidity Risk Management, including new Basel III liquidity requirements.
Sensitivity to Market Risk.- We have an opportunity for improvement here. We have some functionality available in BA-Strategy Analyzer, but we miss Market Data Generation and Simulation capabilities. Hopefully we’ll enjoy them in future releases.
In my opinion, with some limitations, Bank Analyzer is in a very good position for providing structured and good quality data for covering CAMELS analysis, and it’s the best option to build the foundation of regulatory reporting.
Lesson learned; developing great software is not enough, we need to improve the market recognition of its true value.
Looking forward to read your opinions.
K. Regards,
Ferran.
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