D
5
D
BIS II
Migration level planning
2002
2003
2004
2005
2006
2007
Credit risk focus
Working tools
On schedule
Client level RAROC
Loan-pricing
Active portfolio management
Approval, pricing,
performance, capital
adequacy, limit setting
4. Business applications
f EC/Raroc
reporting
3. Embedding BISII/EC
Reg/EC capital reporting
III i
1.2. PD's calculated
1.1. PD's calculated
IV
C Regulatory
1 reporting BIS Hy
AIIBISII^H
models ready
and used
adequate to the complexity of BIS II
regulations or to the ambitious EC
Framework Rabobank has opted to
implement. The EC Framework will
give us a foundation which will refleet
the true economie risk of our activities.
It takes into account all risk types as
well as the diversification of our global
portfolio.
The complexity of what we aim to
achieve, also to be BIS II compliant,
means the BIS II/EC program will be
phased. BIS II becomes effective in
2007. But Rabobank has been at work
on this program since 2001. 'The times-
pan is crucial,' says Vergouw. 'You can't
implement a program this complex and
comprehensive overnight (see
timetable). Plus, we have to give people
the tools they need to do the job.'
According to Vergouw, credit risk is
the current focus. The system we will be
using requires at least two to three years
of proven use by the regulatory authori-
ties. This means the basic infrastructure
must be in place by the end of 2004.
Th ose of you who have attended recent
workshops will know that BIS II requires
us to allocate a rating to each cliënt
before any loan is originated. This rating
allocation has to be both structured and
Group-wide.
In the next few months, up to mid-2003,
you can expect the implementation and
roll-out of a number of tools so that
ratings and a Universal Client Identifi
cation can be calculated and designated
for each cliënt. The Moody's Financial
Analyst (MFA) will replace current
WinFAST and FAMAS applications
currently in use in some branches - it is
a crucial building block in the infra
structure. All data within MFA will be
stored centrally in Utrecht to facilitate
knowledge share and transfer. MFA is
the so-called financial engineering appli-
cation. At the same time, a Credit Rating
Engine (CRE) will be implemented
which will help determine the Probability
of Default per customer. An EC-Calcu-
lator will also be rolled out. This is a
spread-sheet application which will
support risk assessment of a credit by
comparing future EC requirements and
RAROC against current solvency re
quirements.
Training will obviously play a significant
role in the whole of this initial imple
mentation. 'We piloted the roll-out in
both Antwerp and Atlanta,' confirms
Vergouw. 'Subsequently, we continued
this phase of the program in Furope, in
the US and in Singapore. So far, all has
gone according to plan and we are right
on schedule. There is still a lot to be
done, but we started in good time and
are well on track. When we complete
this whole exercise, we will not only be
BIS II compliant, but have a risk man
agement structure in place which will
increase our competitiveness in the
global market.'
Gommunication is a key part of the li IS
II/EC program. Rabobank has a dedi-
cated website BIS2.rabobank.com. On
the siteyou will fittd a mass of Infor
mation on BIS II. In additionthere is a
regular newsletter which will keep you
updated on progress. There will also be
regular workshops and presentations
around the network. The Word will
come back to this important develop-
ment regularly.
30 I Rl The Word I
