SAS tackles risk for EBS

16 Jun 2006

EBS Building Society has implemented a credit risk-management system to enhance its risk-management infrastructure and to help support its preparations for Basel II regulations.

The EBS chose the business intelligence provider SAS’ Credit Risk Management system following a thorough evaluation of all major risk vendors, the group said.

EBS is Ireland’s largest building society and the fifth-largest amongst credit institutions predominantly involved in the domestic retail business. It has total assets of close to €17bn and has more than 400,000 members. The organisation has 663 staff and a network of 103 offices around Ireland.

With the banking intelligence solution from SAS, the building society said it would be able to measure and manage the credit risk in its loan portfolio more accurately to help meet requirements laid down under Basel II. Specifically, the solution will also improve the risk-management and the credit-decision processes within the EBS.

According to Damien Peat, head of performance management at SAS Ireland, the deal is a strategic one for EBS. He did not disclose the exact value of the contract but said that the price of such credit-scoring systems for Basel II typically start at a quarter of a million euro.

The credit risk-management project was completed to deadline and took around 250 man-days, Peat told “The return on investment is months, not years,” he added. This is because by being able to make its own predictions on defaulting payments, a financial institution can reduce the amount of capital that it is required to keep in order to provide against bad debts.

Peat added that the solution is a framework to which more elements can be added. “You can start — as they have — in one area but then look at others,” he said. One of these could be to tackle the issue of customer churn within the mortgage market.

Peat also confirmed that a similar deal with another mortgage provider in the Irish market is imminent.

SAS Credit Risk Management can perform credit data-management, credit scoring and credit portfolio risk-management while providing a credit risk dashboard. Organisations can use the solution to measure credit risk exposures accurately and then evaluate alternative strategies for managing risk. With the system it is possible to model economic capital and perform other tasks related to maintaining adequate regulatory capital reserves and capabilities beyond Basel II requirements.

Fidelma Clarke, head of risk at EBS Building Society, commented: “EBS Building Society is committed to a thorough implementation of the Basel II requirements. We chose SAS because of its proven track record in risk management, the expertise of SAS consultants and its ability to deliver immediate and long-term value-add to our business.”

By Gordon Smith