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Tue 22 Nov 2005 04:00 AM

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Minimal risk

Arab National Bank signs deal with Fiserv's IPS-Sendero unit for its Kamakura risk management solution.

The Arab National Bank has taken the decision to deploy the IPS-Sendero Kamakura Risk Management system (KRM) to measure credit risk in both its current flow and portfolio of collateralised debt obligations. The US$64 billion asset bank will also use the system to measure market risk and credit-adjusted value-at-risk (VaR).

IPS-Sendero, a business unit of FiservIPS-Sendero, a unit of Fiserv and a provider of technology solutions and education for enterprise risk, delivers solutions to enable financial institutions to comply with Basel II and IAS39 legislation, simulate interest rate risk on the banking book and fully test hedge effectiveness using Monte Carlo techniques. Arab National Bank, based in Riyadh, will join the 3,400 financial organisations in 56 countries worldwide that have licensed IPS-Sendero products and services to help manage risk, measure and manage profitability, develop budgets and forecasts and produce information needed for sound decision-making.

The IPS-Sendero KRM is the result of a strategic partnership between IPS-Sendero and Kamakura Corporation. According to Yasser Shareef, head of market risk for Arab National Bank, the system was selected for its market and treasury portfolio credit risk operations.

"IPS-Sendero KRM has distinguished itself in credit risk modelling with the quality of its research and its full disclosure to clients of its credit risk model performance," Shareef says. "We believe that KRM is unique in its ability to produce default correlations for any pair of companies with default probabilities on the system. Without this pair-wise correlation, credit risk cannot be accurately modelled and measured."

Nigel Sirett, managing director of EMEA for IPS-Sendero, says the bank will benefit from a combination of IPS-Sendero's strong client support and Kamakura's integrated risk analytics. "Arab National Bank aims to be on a par with the best global banks in terms of how proactively risk is managed," Sirett says. "Both organisations will benefit from active collaboration in the framework of risk modelling."

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