London, 10 January 2006 – Three of the leading Icelandic issuers today announced that they have selected SunGard’s Reech FastVal, an independent valuation service, for their structured medium-terms notes (MTNs). The service helps enable Islandsbanki, Kaupthing Bank and Landsbanki Íslands to compute the fair value of their portfolios containing products ranging from vanilla cash products to complex exotics and hybrid structures.
These institutions chose to implement Reech FastVal in response to the growing sophistication of the Icelandic market, both in terms of the structures that are used and the funding opportunities available. Reech FastVal helps the institutions to anticipate and meet future funding requirements. By calculating the probability of exercise and the average life expectation, these institutions are able to monitor the maturity of any given portfolio of callable issues. This combined with Reech FastVal's ability to report a standard, consistent value means those responsible for risk control are able to generate consistent values for their IAS 39 reporting requirements.
With increasing complexity in derivative pricing and construction, valuations may differ between counterparties. In order to evaluate different contracts from different counterparties, an independent platform offering a quick and decisive valuation is needed.
Finni Sigurdsson, executive director of interbank markets at Islandbanki, explained, "SunGard’s Reech FastVal system was what we needed in terms of service. Being able to rely on SunGard’s expertise and programming skills to handle the trade input helps us to concentrate on our side of the business. Moreover the flexibility offered by the service suits our needs in light of the constant growing complexity of our products. It is a very cost-effective way to comply with our regulators’ requirements."
Dr. Oskar Haraldsson, quantitative analyst at Kaupthing Bank, said, "Kaupthing aims to increase the issuance of structured products and Reech-FastVal will play an important role in achieving that aim. One of the key ingredients in the pricing of these structures is SunGard’s Reech FastVal system. It helps us to get a regular marked-to-market update of our issues in the market."
Thorir Ingolfsson, head of risk management at Landsbanki, added, "In our search for vendors offering derivatives valuation, SunGard’s Reech was soon established as a benchmark leader. For our most complex derivatives, Landsbanki needed a backup valuation from an independent third party. As well as the need for vendor independence and worldwide recognition, our main focus was on pricing accuracy, reporting and flexibility - all areas in which SunGard performs strongly."
David Hassell, European head of sales at SunGard's Monis and Reech, commented, "The Scandinavian market is a big market for structured MTN issuance and consequently our derivative valuation services and we have made a specific effort to be present in Iceland. Given its relative size within Europe, Iceland has an economic presence that punches well above its weight. Iceland’s issuer market has institutions with excellent credit ratings and sufficient open-mindedness to embrace the benefits of structured product funding, helping give them a real competitive edge."