1. A Basel II Approach by
Alexandra Lederer-Ponzer Oracle EMEA Risk & Compliance Solution Centre
22 Feb 2006

2. Basel II be competitive! be compliant!

3. The Basel II Accord Pillar I – Minimum Capital Requirements
Credit Risk
Standardised Approach
Internal Ratings Based Approach
for Non Securitisation Exposures
Foundation IRB + Advanced IRB
for Securitisation Exposures
Ratings-Based Approach, Internal Assessment Approach (IAA), Supervisory Formula (SFA)
Market Risk (unchanged)
Standardised Approach + Internal Models Approach
Operational Risk
Basic Indicator Approach
Standardised / Alternative Standardised Approach
Advanced Measurement Approach
Pillar II – Supervisory Review
Transparency + Consideration of other Risk Areas (IRRBB, Liquidity Risk, …)
Pillar III – Market Discsipline
Disclosure Reporting (Central Bank Reporting)

4. Basel II Challenges for Banks
Data Management
For Pillar I Regulatory Capital Calculations
For Pillar II Transparency and Other Risk Management Areas (IRRBB, Concentration Risk, etc.)
For Disclosure Reporting (Central Bank Reporting)
 Availability of Data, Data Quality and Efficient Data Management are KEY!
Risk Analytics
Pillar I Credit, Market & Operational Risk Analytics to compute Regulatory Capital
RW, RWAs, Regulatory Capital Computation
PD/LGD estimation for IRB Aproaches
Economic Capital Calculation Requirements
Reporting
Pillar III - Disclosure Reporting - Be compliant
Pillar II – Transparency Reporting, Auditing
Pillar I plus internal Reporting Requirements

5. Basel II Why Oracle?

6. Oracle understands the FS Business
Oracle understands the FS Business... Oracle Financial Services Applications (OFSA)

7. Oracle has the Experience ...
> 200 customers use Oracle Financial Services Applications (OFSA)
for
Data Management
Financial Management and Reporting
As a first step towards ‘Risk Adjusted Performance Management’ (RAPM)
Bank of Tokyo-Mitsubishi

8. Basel II – complex or easy?
‚Reveleus Basel II Solution‘ is a flexible, easy to use solution for the computation of Capital Charges

9. Reveleus Financial Services Analytics
Enterprise
Risk Management
Enterprise
Financial Performance
Treasury Analytics
Funds Transfer Pricing
Asset Liability Management
Market Risk Analysis *
Management Reporting
Product Profitability
Organizational Profitability
Customer Profitability
Credit Risk
Retail Credit Risk Analysis
Corporate Credit Risk Analysis
Operational Risk
Reveleus ORTOS
Finance
Funds Transfer Pricing
Budgeting and Forecasting
GL Consolidation
Compliance
Reveleus Basel II Solution
Customer Insight
Marketing
Specialized Analytics
Customer Lifetime Value
Campaign Management
Customer Segmentation
Cross Sell / Up Sell
Channel Analytics
Customer Profitability
Credit Cards
Mortgage

11. Reveleus - Basel II Coverage
Pillar I : Capital Adequacy Calculations
Credit Risk
Market Risk
Operational Risk
Calculation of
Exposure
Calculation of
PD / LGD
Calculation of
RWA
Value at Risk
Support for all 3
approaches
Standardized
Measurement
Methods
Adjustment for
Collateral
Valuation
Supervisory Risk
Weights and LGD
Basic Indicator Approach: Capital Calculated as a percentage of Gross Income
Standardized Approach: Line of Business Based Exposure Indicators
Advanced Measurement Approach: Capital computation as per LDA
Adjustment for
Credit
Mitigants
Interest Rate
Risk
Calculation of
Risk Weights
based on PD & LGD
Equity Position
Risk
Netting
Balance Sheet
Items
Foreign Exchange
Risk
External / Internal
Rating Systems
Commodities
Risk
Standardized Approach
Internal Ratings Based Approach (Foundation)
Internal Ratings Based Approach (Advanced)
Treatment of
Options
Pillar II : Supervisory Oversight
Pillar III : Market Discipline
Usage of Metadata
Transparency
Capital Adequacy Reporting
Flexible Reporting
Rules Based Engine
Risk Assessment Reports
Quantitative Disclosures
Qualitative Disclosures

12. Reveleus supports all Basel II Approaches for Credit Risk
Non-Securitisation Exposures
Standardised Approach
Collateral Handling & Optimisation
Simple and Comprehensive
Internal Ratings Based (IRB) Approaches
Incl. Specialized Lending
Incl. Equity using PD/ LGD Approach
Incl. Equity using Simple Approach
Securitisation Exposures
RBA (Ratings Based Approach)
SFA (Supervisory Formular Approach)
IAA (Internal Assessment Approach
Capital Computation as per Basel I

13. Reveleus Basel II Solution supports
Computation of Capital Charges for (see Q10)
Credit Risk
See previous slides
Market Risk
using Market Risk VaR inputs for the capital computation
For Standardised Approach with next Release 3.0 (May 2006)
Operational Risk
For Basic Indicator Approach
For Standardised and Alternative Standardised Approach
Using Op Risk VaR inputs for AMA
Using Reveleus ORTOS for Op Risk Modelling and to track op risk data by business lines, etc.
Computation of Qualifying Capital (Tiers 1, 2, 3)
Computation of Economic Capital

14. Reveleus Basel II Solution
Multi-Jurisdiction capital computation
Easy parameterisation of Approaches for multiple national discretion overrides by business users
Multi-Entity capital computations
Based on different approaches per entity
Simultaneous capital calculations of the same portfolio based on different approaches
Multi Currency Transactions
Statistical estimation of PD and LGD
Stress Testing, Back Testing, Scenario Simulations
Collateral Optimisation
User Access in multiple languages
100% Web-based, using a user-friendly User Interface

15. Reveleus Basel II Solution Components
Business
User
Baseline Run
Simulation Run
Simulation
Outputs
Baseline
Exposure Rules
Collateral Rules
Credit Mitigation Rules
Securitization Rules
RWA Computation Rules
Optimization
Engine
Regression Analysis
Naïve Bayes
Distribution Fitting
PD Estimation
LGD Estimation
Allocating Mitigants to Exposures
Reveleus Unified Metadata
Centralized Business Definitions – s, Metrics, Reports
Reveleus Data Structures
Pre-Built Global Banking Data Model
Modeling
Framework
Rules
Run
Applications
Models
Pillar II
Reporting Templates
Pillar I Reporting Templates
3rd Party Reporting Tool Support
Pillar III Reporting Templates
Reporting
Scenarios
Filters

16. Reveleus – Capital Computations
Ratings
Maturity (M) PD
Calculation
LGD
Netting
Off Balance Sheet
Off Balance
Sheet
K irb
Credit
Enhancement
Level
Granularity
Thickness
Q-Value
CREDIT
RISK
Rating

17. Reveleus Risk Solutions End State Vision
Enterprise Risk
Infrastructure
Reveleus Risk Applications
Reporting &
Analysis
Security & Operational Framework
Transparency of Process, Models & Output
Internal Reporting
& Analysis
Aggregated & Relational Reporting
Capital Adequacy Reporting
External Reporting
Local Regulator Reporting
ALM
Enterprise Risk Repository
Capital
Computation
Home/Host Reporting
PD / LGD Estimation
Credit
Rating
RetailCredit Risk
Corp.
Credit Risk
Market Risk
FTP
Reveleus Enterprise Risk
Reveleus Basel II Solution
Loan Systems
Collateral Systems
Information Vendors
Treasury
Systems
General Ledger
Economic Capital
EDW
Rule/Run Framework
Enterprise Risk Business Metadata
Risk Based Pricing
RWA
OpRisk
Data
Ops Risk

18. Thank you ! For further information pls. contact
My personal note:
Basel II is about standard business rukes defined by BIS II and EU/CRD.
A standard solution provides ease of use and the necessary flexibility for business users to modify these business rules if required by the local regulator.