DS0409_REPORT_p9-p10_F1:Layout 1 1/4/09 15:59 Page 9
REVIEW
Getting the whole picture
SCV has often been built as a tool for he Swiss are famous for their banks and for keeping
marketing. David Reed looks at how
T
customer account details secret. So it is a surprise that a
regulation named for a Swiss town should be all about giving
customer data greater visibility.
managing information is also about That is one of the impacts of Basel II, a set of banking rules which
were intended to ensure lenders understood their exposure and had
managing customer risk. set aside sufficient capital reserves to protect themselves. You could
argue that the regulations have clearly failed, given recent events.
But one reason for that may be that banks have yet to follow
through on what Basel II really means. “It has been more about the
process, not understanding the quality of the data,” points out Ed
Wrazen, vice-president of product marketing and strategy at Harte-
Hanks Trillium Software.
The idea of stress testing financial institutions against a range of
different scenarios was introduced by Basel II. Almost certainly these
scenarios did not include wholesale collapses in house prices, large
levels of default and an ensuing credit crunch.
Even so, banks might have avoided the worst of it had they built a
single customer view and deployed it against risk management. “A
mid-sized bank could have 200 loan origination systems. A lot of
them are bespoke and built for a specific product line. When
individuals have multiple borrowings, they may not have reconciled
that across all those systems,” says Wrazen.
While the regulations gave a push start to the creation of SCV for
risk management, it is undoubtedly the current trading conditions
which have increased the momentum. Instead of seeing risk as a set
of processes to ensure checks are made at the point of lending, banks
are now thinking in terms of seeing how risk can change over the life
of a contract.
Wrazen says this is where tracking customers in a unified view can
make a real difference. “If they are providing a loan to an organisation
and get a rating from one of the agencies like Standard and Poors or
Moodys, another part of their business might also make a loan and
get a different level of risk. They should be getting an indicator of
that difference,” he says.
Companies frequently have multiple operating divisions that enjoy
different levels of standing in the market. This is to protect the parent
company from the failure of one unit. But it exposes lenders if they can
not align their view of all borrowing within a group and especially if the
ratings agencies start to downgrade previously blue-chip borrowers.
The Financial Services Authority has recognised the risks involved
in this non-integratd view of customers. It is currently considering a
proposal which would make SCV mandatory as an asset that would
be handed to the Financial Services Compensation Scheme in the
event of a bank’s collapse, thereby ensuring customers get paid.
“The issue was brought into perspective by Northern Rock,” notes
Erol Mustafa, partner in the information management and analytics
team, EMEA, at Ernst & Young’s technology and security risk services
practice. The exposure of depositors to a bank collapse has forced
changes to the regime (including an increase in how much of any
savings is covered.)
“The objective of the consultation paper is to to make
recommendations to enable the repayment of deposits to be
completed by the FSCS in seven days,” he says. If adopted, financial
institutions will have until the 31st December next year to build a
single customer view, thereby giving a £1 billion shot in the arm to the
data management industry. a167
DATA STRATEGY | REPORT | APRIL 2009 9
Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21