"With over 150 clients and more than fifteen specific Basel II engagements, we are keenly aware of the depth and breadth of an institution's unique requirements," said Michael Zerbs, Chief Executive Officer at Algorithmics. "Algo Capital meets these unique requirements by satisfying both
tactical and strategic approaches to Basel II using a robust, proven, and
consistent Algorithmics infrastructure."
Algo Capital's phased approach decouples a bank's Basel II project phases
and can respond to new requirements as they evolve, thereby reducing the cost
and risk associated with a large-scale implementation. Algo Capital is composed of modules and functionality controlled by pre-configured parameters that will provide calculations, consolidation and reporting in parallel throughout incremental project phases. One implementation of Algo Capital can manage multiple sets of data, data sources and results across multiple regulatory regimes and geographies, thereby reducing the cost and risk associated with a large-scale implementation.
Algo Capital supports economic and regulatory capital, across all Pillars (I, II, and III), approaches (Standardized, Foundation IRB and Advanced IRB) and asset classes (Corporate, Sovereign, Bank, Retail and Equity). The amount of economic capital potential available for banks' business is often higher than Tier 1, Hybrid Tier 1 and Tier 2 capital, which is required to be allocated for regulatory capital. Therefore banks must have a framework for both regulatory and economic capital in order to truly master the challenges of satisfying regulators and to have oversight about economic capital allocation, while optimizing capital allocation to gain maximum business benefit.
Algo Capital also provides the required data infrastructure, calculation
engines, consolidation and management reporting functionality for all asset
classes needed to balance capital allocations effectively. The solution
enables risk mitigation adjustment for banking, trading and retail books and
optimal allocation of risk mitigants in order to reduce consolidated exposures.
Algo Capital offers extremely flexible consolidation functionality required to fulfill regulatory requirements, but also to provide single customer view handling, and consolidated results for any grouping analysis that can in turn be used in the context of management reporting. This ensures a consistent reporting framework for roll-up (aggregation) and drill-down across business units, geographic regions, customer, asset classes, product and risk types.
Algo Capital also enables comprehensive credit workflow management through the Algo Credit Administrator, which helps to define and manage all stages of the credit business process - including the use of collateral and guarantees - and serves as repository for all mitigation data. The solution also enables life cycle management of credit grading information. Changes to PD, LGD and Loan Loss information by compliance personnel such as Credit Portfolio managers or Credit Managers are tracked by a workflow controlled process which is fully audit compliant.
A key requirement under Basel II is the need for a comprehensive operational risk system. Algorithmics recently announced enhancements to its Algo OpRisk solution including enhanced risk self-assessment and user-friendly GUIs and reports. Within Algo Capital, Algo OpRisk is leveraged to meet the qualitative and quantitative criteria of the Advanced Measurement Approach for determining the operational risk regulatory capital requirements under Basel II. As a result, through Algo OpRisk financial institutions will be able to reduce their operational risk capital, which in turn can be redirected to finance growth and/or new opportunities.
As a solution within Algo Suite, Algo Capital is also efficiently integrated into a client's existing risk framework. Algo Capital offers fast operational availability and mitigation of implementation risks - features that are critical in the context of the tight deadlines set by regulators. The solution's modular approach allows risk managers to implement the building
blocks of a complete solution, and build one upon the other, at low cost and
low project risk. The system topology of Algo Capital mirrors Basel II's
design, allowing for an incremental deployment of credit and capital functionalities, starting with Pillar I, and then progressing to Pillar II and
Algorithmics has significant experience in helping clients meet the country-specific regulatory compliance requirements and preferred regional approaches to risk measurement and management. Financial institutions in more than fifteen countries have received regulatory approval for internal risk models based on Algo Market, and reaped substantial capital savings as a result.