LONDON Sept. 27, 2004--The European Bank for Reconstruction and Development
(EBRD) has awarded a mandate to Standard & Poor's Risk Solutions, a leading
supplier of credit risk management solutions, to supply its Portfolio Risk
Tracker (PRT) product for the bank's Treasury operations. PRT will replace a
commercial portfolio management system that had already been in use by the
EBRD Treasury team.
"The Treasury operations of banks typically hold a more diverse portfolio of
assets than a bank's loan book," said Arnaud de Servigny, European head of
products at Standard & Poor's Risk Solutions. "This can include derivatives,
structured products and bonds. Portfolio Risk Tracker is a very suitable risk
management tool for such portfolios as it measures, and helps manage,
concentrations of risk across these diverse assets."
This is the latest in a line of high-profile wins for Standard & Poor's Risk
Solutions. The mandate follows a competitive tender process in which Risk
Solutions not only met the EBRD's stringent supplier-qualification policies
but also offered a product that directly addressed the bank's needs.
"Portfolio Risk Tracker had both technical and qualitative features that are
unique," said Jean Sorasio, Director of Treasury Risk Management at EBRD. "We
had decided we should undertake a new procurement round to fully assess the
greater range of systems now on offer. We found that the market had moved on
considerably - especially in terms of the research and data handling that
underpins the analysis. PRT was superior to all its rivals."
EBRD will use the PRT model to obtain nightly risk contribution information
on their portfolio. Central to the model's calculations is the notion of
'Expected shortfall'. These risk calculations may be impacted by changes in
interest rates, foreign exchange rates, credit ratings actions and market
When not running risk concentration calculations, the model can be utilised
by risk management teams to run scenarios and 'what if?' calculations. Active
portfolio management - risk offload - can also be considered.
Transparency is a key component of PRT. "The PRT product developers
recognised that, when operating the system, bankers would want to understand
fully the calculations and mathematics that make up PRT's output," said Mr de
Servigny. "Only when understanding the inputs and every step of the
calculation can the client gain total confidence in the stresses and
concentrations being highlighted by the outputs."
The product is designed so that banks could switch to PRT with no alterations
to their existing database. "It is a painful process for any financial
institution to design a database that is useful for a piece of software to
undertake risk calculations," says Mr de Servigny. "So we developed an IT
system that could read different formats, and where existing databases could
be automatically converted to our format."
This was a winning feature in EBRD's assessment of the product. "We had an
existing input database, which we wanted to keep," said the EBRD's Jean
Sorasio. "The fact that the change to PRT would be so seamless was therefore
a major selling point."
Standard & Poor's Risk Solutions provides Credit Risk Solutions that address all the major components of an internal rating system, including tools and methodologies for the analysis of probability of default, loss given default, and exposure at default. Its portfolio tools enable clients to use their assessments of individual risk exposures in analyzing credit risk exposure on a portfolio basis. Risk Solutions' integrated credit risk management solution leverages Standard & Poor's experience in credit assessment to help clients manage enterprise risk, economic and regulatory capital, active exposures and risk pricing with confidence.
Standard & Poor's, a division of The McGraw-Hill Companies (NYSE:MHP), is
the world's foremost provider of independent credit ratings, indices, risk
evaluation, investment research, data and valuations. With approximately
6,000 employees located in 21 countries, Standard & Poor's is an essential
part of the world's financial infrastructure and has played a leading role
for more than 140 years in providing investors with the independent
benchmarks they need to feel more confident about their investment and