In recent years, Zagrebačka Banka has undergone an exceptional period of growth, particularly following privatisation in 1989, when the bank became a joint stock company. When Croatia gained international recognition as an independent Republic in May 1991, the bank had already established its reputation as the country’s leading financial institution. As Croatia’s largest full-service bank, with 169 branch offices and more than 2 million retail accounts, Zagrebačka Banka is now a dominant force in its domestic market, commanding a major share of both the corporate and retail banking sector. To support its extensive business activities, the bank recognised the need for an advanced treasury solution as far back as 1998.
Ana Sostaric, Treasury Risk Department Director, explains, "We wanted to continue expanding our business operations and had established additional trading desks for fixed income and corporate clients. We also faced aggressive competition from a number of foreign banks, and realised we needed to enhance our systems to remain competitive." At the time, Zagrebačka Banka was using a number of in-house developed systems, which were costly to maintain and only partially integrated, therefore requiring a high degree of manual intervention to transfer data between the bank’s front and back-office.
The bank’s search for a replacement system took place over several months, and covered a variety of sources. Miroslav Acman, Zagrebačka Banka’s I.T. Division Project Manager, comments, "Initially, 10 packages were selected for review, although this was quickly reduced to a shortlist of just three systems for more detailed evaluation." Having completed a comprehensive investigation of the 3 shortlisted systems, Zagrebačka Banka selected MKI Frustum’s OPICS as its preferred treasury solution, the contracts being signed at the beginning of September 1999. Implementation got under way almost immediately, in conjunction with staff training in White Plains.
Miroslav Acman points out, "From the beginning, we wanted a fully integrated front, middle and back-office solution. We also needed an open system that could be integrated with the bank’s existing I.T. infrastructure, including its General Ledger, which runs on an IBM mainframe. Another requirement was the flexibility to interface to Reuters 2000 and the SWIFT messaging system."
"OPICS was judged to be the best overall fit with the bank’s functional specification and in fact, came very close to meeting our total requirements. We recognised that OPICS was a world-class system, capable of supporting the full range of treasury instruments, as well as being user-friendly and offering risk management functionality," he continues. "We also felt that we could build a good working relationship with MKI Frustum which was important to us."
Another major factor that influenced the bank’s choice of system was the technology platform. The underlying technology and architecture of OPICS is an excellent fit with the bank’s strategic technology platforms, which include the Oracle database product running under AIX, together with client workstations on Microsoft Windows NT.
Zagrebačka Banka has now gone live with OPICS as a fully integrated front, middle and back-office solution. The system includes applications to support Foreign Exchange, Deposits & Loans, Fixed Income and Call & Notice transactions, together with the system’s Nostro Management, Accounting sub-ledger, Customer Credit and Risk Management Analytics modules. Miroslav Acman stresses that "a vital feature of the new system was the ability to transfer data from the OPICS General Ledger to the bank’s main General Ledger system. Because OPICS provides a more sophisticated environment than was previously available, we took the opportunity to improve our accounting procedures and have even enforced changes to part of the Central Bank’s requirements."
Miroslava Tomicic, Director of Zagrebačka Banka’s Treasury Back-office, describes some of the benefits the bank has already gained. She says, "OPICS has made a tremendous improvement in the quality of back-office operations, particularly in terms of productivity. The system will enable us to handle a far greater volume of transactions in future, thereby helping to increase the bank’s profitability still further. Previously, our traders were involved in a great deal of administrative work, but OPICS allows them to concentrate on trading, as well as providing the necessary information to manage their positions in real time."
Miroslav Acman concurs with this view, saying, "OPICS enables us to capture and manage our entire portfolio of Treasury transactions on a single database. Now, with just one keystroke, we have the ability to monitor our traders’ exposure to risk and analyse outstanding positions. In addition, we are now able to carry out mark-to-market revaluations and monitor counterparty exposure in real-time, using current market rates. Potentially, we will also have the ability to consolidate cash flows from different areas of the business."
"OPICS’ event-driven processing and accounting covers the entire lifecycle of each transaction and has provided the bank with complete operational control, to put us on a par, or even ahead of, other major market players," he adds. "We now have the ability to measure market risk, in line with best practice, as adopted by more developed markets. As well as improving our management of liquidity profiles to make more efficient use of capital, OPICS provides us with a powerful framework on which to plug in and develop new products and additional functionality."
Ana Sostaric explains, "We are now in a position to develop our treasury business still further, and introduce trades in instruments such as Repurchase Agreements (Repos) and more advanced derivative products. We expect the financial markets in Croatia to develop in this direction, and plan to expand the bank’s business into new trading instruments, in line with market trends."
Another advantage of OPICS is that it has provided Zagrebačka Banka with the functionality to add new branches, cost centres and additional currencies to its database, to support the bank’s ongoing expansion into new markets. During 1999 and 2000, Zagrebačka Banka became the majority shareholder in Hrvatska Banka Mostar Bosnia & Herzegovina, which today operates as Zagrebačka banka BH Mostar. Recently, Zagrebačka Banka acquired the Sarajevo-based Universal Banka. The acquisition was a continuation of the bank’s strategy to expand its operations in Bosnia & Herzegovina, and consolidate its position as the leading banking group in the Bosnian market.
Miroslav Acman emphasises, "We have already taken the first step towards our ultimate goal of achieving true straight-through-processing (STP). Our IT strategy has always been driven by business requirements, and the implementation of solutions that support our products and business operations. Extensive user involvement, combined with excellent support from MKI Frustum were other key elements in the successful implementation of OPICS."
"The success of this project has also proved that the transfer of technology from a well-developed market to an emerging markets economy is not only possible, but imperative, in order to achieve a greater degree of efficiency that will allow us to compete effectively with foreign banks," he ends.