Consultants Celent have urged banks looking for Basel II systems to thoroughly assess their needs against a broad spectrum of solutions and services now becoming available.
In a new report, Risk Management and Basel II: Comparing the Financial and Credit Risk Solution Vendors, Celent assesses offerings from seven vendors. The report examines the state of the market for Basel II solutions and the vendors that are helping institutions meet their requirements. The report also examines the lessons learned from the first-wave institutions that have purchased Basel II solutions already.
Celent says that, as risk management budgets grow in reaction to mounting pressure to integrate financial risk management practices, banks have more money to spend on the issue. But the firm warns that, in addition to the main elements of a Basel II solution – like capital calculators, reporting, data warehouses, and data management tools – banks should be placing greater emphasis on replacing “peripheral” applications for activities in areas such as asset/liability management, limits management, and credit scoring.
Celent notes that there are several vendors offering financial/credit risk and Basel II solutions from diverse backgrounds. Some vendors are “new” to risk management, while others have functionality covering multiple areas, which can sometimes make the market for solutions confusing.
“Vendor and solution characteristics vary significantly,” says Cubillas Ding, Celent analyst and author of the report. “Given the substantial investments required of these projects, there is a stronger drive for financial institutions, especially for those in non-mandatory jurisdictions outside Europe, to better align risk management ambitions, application functionalities, technology architecture requirements, and vendor capability in various jurisdictions and business lines.”
Lauren Bender, Celent analyst and co-author of the report, adds that vendor solutions available today give banks a range of options from selecting best-in-class components to complement existing functionality, to forming closer alliances with vendors for Basel II compliance development and management.
The new report, which follows the Celent report, Risk Management And The Basel II Game: Market Updates at Halftime, focuses on the technology angle of Basel II solutions. It is intended to be a preliminary guide for institutions planning initiatives and evaluating vendors to prepare for the new Basel regime.
The vendors analysed in detail include Algorithmics, Fermat, i-flex Reveleus, Misys Almonde, SAP, SAS, and SunGard.