A leading nationalized Bank uses CMC's ALM application to manage its assets and liabilities mismatches and evolve a risk mitigation strategy

This is a public sector bank of the Government of India. Established in 1911, it has business interests in diversified areas of banking and finance.

In line with the Basel II and RBI guidelines, this nationalized bank wanted to install an enterprise-wide asset-liability management and risk management solution. After it evaluated applications from domestic and global players in this niche area of business, it selected CMC's ALM solution as appropriate for its needs.

CMC consultants conducted a gap analysis study to understand and assess the effort and timelines required to implement the solution. One major challenge they faced was trying to understand the application features of the eight existing legacy applications in the bank. Each had a separate platform, technology and design methodology.

Understanding this was critical, because of the stiff implementation deadlines, and also because the basic data inputs needed for ALM application to run were from these eight different applications.

To solve the problem, we devised a common data file format (CDF), in which the data could be extracted and provided to the ALM application. This simplified the problem and resulted in faster implementation of the ALM system in the bank.

Currently, we are automating the inputs from various legacy applications to the ALM application using the CDF process. The large networks of this nationalized bank's branches are being included in the automated ALM data acquisition process.

The different ALM and risk management functions that are currently implemented at this leading nationalized bank include:

	Risk parameters
	Risk identification
	Risk measurement
	Risk management
	Risk policies and tolerance levels

The following modules have been implemented:

	Interest rate shocks
	Value at risk (VaR)
	Duration gap analysis
	Modified duration analysis
	Convexity analysis
	Capital adequacy ratio (CAR)
	Earnings at risk (EaR)
	Transfer price mechanism (TPM)
	Data forecasting
	Target gap analysis
	Cost of funds and return on asset
	Data analysis and data simulation
	Prudential limits monitor
	Break-even analysis
	Structural liquidity profile
	Interest rate sensitivity
	Maturity and profile (forex)
	Statement of interest rate sensitivity (forex)

The application provides all types of regulatory and MIS reports, apart from customised reports complying with the reporting requirements of the regulator - the Reserve Bank of India. Executives from this leading nationalized bank's risk management department say they have benefited from ALM.

Benefits

	Various analysis and strategies can be simulated, both at the branch level and enterprise-wide, all over the bank
	Automated data transfer from the bank's disparate legacy systems to the ALM application. System controls instituted for data consistency, accuracy and completeness. Checks with alerts and reminders
	Platform independent and scalable. Configuration of new business lines, heads of accounts or addition of new branches can be done by the bank staff themselves. Vendor support is not required
	Highly modular and parameterised in design, enabling ease of maintenance by the bank
	Extensive reporting capabilities: Operational, statistical and user-customised

Bank officials are confident that once the software covers the entire bank, their ALM and risk management functions will be totally automated and streamlined.

International Bank
In addition to the asset and liability management (ALM) product, the application at an international bank has an interface with Bankmaster, the operational system of the bank. This interface reads the data from Bankmaster, which is stored in a BTrieve database, and converts it into flat files (ASCII files). An application named INTALM has been developed in Visual Basic 4.0 (16-bit) for the purpose, called the VB4 interface.

Data from these flat files is then uploaded into an Oracle 8i database for the ALM system through a utility 'SQL loader'. This interface is known as the VB6 interface.

This international Bank has four branches in India's four main metropolitan cities. The data consolidation is done at its Mumbai office.