Dear,
As technology and globalization of the Capital Markets incentives Financial Innovation, new activities are becoming popular, a particularly interesting one is the concept of Active Risk Management.
Active Risk Management objective is improving the performance of a portfolio with dynamic trading and use of derivatives.
The basic idea is looking at the market continuously searching for arbitrage opportunities and taking positions anticipating the market’s behavior.
Historically SAP Banking has not had a strong position as an Active Risk Management platform.
Active Risk Management requires very fast simulation functionalities, as the main driver of this discipline is anticipating market’s decisions.
Obviously this only can be achieved by running statistical computer simulations and building market behavior patterns which support the decision making process.
Those of you who have had exposure to Bank Analyzer, know that it’s far from being a fast system as it requires a high level of data accuracy for running the standard calculation processes.
On the contrary, Active Risk management requires very quick decisions, supported by decision taking models based on limited and fast changing information.
Simplifying, Bank Analyzer looks at the sustainability and long term performance of the bank’s portfolios, while Active Risk Management looks at the real time market opinion about the potential value generation of the portfolio components.
But today, the scenario is ready to change, impacted by two forces; new regulation and breakthrough technology.
Since 2008 Financial Crisis, new banking directives regulating financial instruments trading have been constantly increasing liquidity and capital requirements that financial institutions participating on trading
markets must fulfill. Typical examples are the European Market Infrastructure Regulation
http://ec.europa.eu/internal_market/financial-markets/derivatives/index_en.htm
and the Dodd-Frank act (particularly Chapter VII) in the US.
http://www.sec.gov/spotlight/dodd-frank/derivatives.shtml
The US and European regulatory framework present relevant differences, but they coincide in two principles.
- Increase Capital requirements to financial institutions participating on derivatives trading.
- Incentive central cleared trade of derivatives with higher requirements of disclosure, collateralization and supervision.
On the side of technology, SAP is delivering new HANA Powered components which increase significantly their performance. For example; stress testing simulations which could take hours with previous Bank Analyzer releases, can be run in minutes taking advantage of the In-Memory computing paradigm.
The combination of both drivers, regulation and breakthrough technology, is going to be a very relevant competitive advantage for SAP Bank Analyzer, when it comes to future Active Risk Management initiatives.
SAP Banking has the holistic data model for being compliant with more stringent regulatory requirements; and with HANA, it enjoys a new technology for speeding statistical simulations on fast changing environments.
We’re at the beginning of the transition period; as the financial system travels to the new model, regulation will become more stringent, incentivizing efficient capital management and penalizing speculative trade.
In this scenario, the combination of the Analytical Capabilities of Bank Analyzer powered by SAP HANA will close the gap between regulatory requirements and business needs.
I tried to explain it in a post nearly 3 years ago.
http://blogs.sap.com/banking/2012/02/01/capital-optimization-sap-hana/
SAP HANA is not about doing the same things faster, it’s about doing new things.
Looking forward to read your opinions.
As technology and globalization of the Capital Markets incentives Financial Innovation, new activities are becoming popular, a particularly interesting one is the concept of Active Risk Management.
Active Risk Management objective is improving the performance of a portfolio with dynamic trading and use of derivatives.
The basic idea is looking at the market continuously searching for arbitrage opportunities and taking positions anticipating the market’s behavior.
Historically SAP Banking has not had a strong position as an Active Risk Management platform.
Active Risk Management requires very fast simulation functionalities, as the main driver of this discipline is anticipating market’s decisions.
Obviously this only can be achieved by running statistical computer simulations and building market behavior patterns which support the decision making process.
Those of you who have had exposure to Bank Analyzer, know that it’s far from being a fast system as it requires a high level of data accuracy for running the standard calculation processes.
On the contrary, Active Risk management requires very quick decisions, supported by decision taking models based on limited and fast changing information.
Simplifying, Bank Analyzer looks at the sustainability and long term performance of the bank’s portfolios, while Active Risk Management looks at the real time market opinion about the potential value generation of the portfolio components.
But today, the scenario is ready to change, impacted by two forces; new regulation and breakthrough technology.
Since 2008 Financial Crisis, new banking directives regulating financial instruments trading have been constantly increasing liquidity and capital requirements that financial institutions participating on trading
markets must fulfill. Typical examples are the European Market Infrastructure Regulation
http://ec.europa.eu/internal_market/financial-markets/derivatives/index_en.htm
and the Dodd-Frank act (particularly Chapter VII) in the US.
http://www.sec.gov/spotlight/dodd-frank/derivatives.shtml
The US and European regulatory framework present relevant differences, but they coincide in two principles.
- Increase Capital requirements to financial institutions participating on derivatives trading.
- Incentive central cleared trade of derivatives with higher requirements of disclosure, collateralization and supervision.
On the side of technology, SAP is delivering new HANA Powered components which increase significantly their performance. For example; stress testing simulations which could take hours with previous Bank Analyzer releases, can be run in minutes taking advantage of the In-Memory computing paradigm.
The combination of both drivers, regulation and breakthrough technology, is going to be a very relevant competitive advantage for SAP Bank Analyzer, when it comes to future Active Risk Management initiatives.
SAP Banking has the holistic data model for being compliant with more stringent regulatory requirements; and with HANA, it enjoys a new technology for speeding statistical simulations on fast changing environments.
We’re at the beginning of the transition period; as the financial system travels to the new model, regulation will become more stringent, incentivizing efficient capital management and penalizing speculative trade.
In this scenario, the combination of the Analytical Capabilities of Bank Analyzer powered by SAP HANA will close the gap between regulatory requirements and business needs.
I tried to explain it in a post nearly 3 years ago.
http://blogs.sap.com/banking/2012/02/01/capital-optimization-sap-hana/
SAP HANA is not about doing the same things faster, it’s about doing new things.
Looking forward to read your opinions.
Join the SAP Banking community at: http://www.linkedin.com/e/gis/92860
K. Regards,
Ferran.
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