Lloyds TSB selects SAS to manage risk, collect rewards

Lloyds TSB, a leading UK financial services group, has selected SAS Risk Management for Banking software to provide a foundation for risk management that goes beyond Basel II compliance. The SAS application is enabling Lloyds TSB to satisfy all the requirements of Basel II, as well as improve capital allocation, provide financial transparency, increase profitability and maximise the return for shareholders.

Under Basel II requirements, banks must consider the amount of capital (known as the capital charge) they need to hold to mitigate risk. Because SAS enables complex analyses of customers' ability to default, Lloyds TSB can gain even deeper insight into the cost of making certain decisions. This improved risk segmentation has already resulted in significant reductions in the credit risk capital charge for Lloyds TSB of up to 20% for unsecured loans and up to 50% for mortgages.

In addition, SAS is enabling Lloyds TSB to automate many manual processes such as risk reporting, performance monitoring and credit scoring, thereby enabling the bank to improve its interaction with customers.

"Over the last 15 years, Lloyds TSB has developed an IT infrastructure that provides the basic foundations to address risk. We have been using SAS throughout this time and have never seen the need to use anything else. SAS moves with the times, remains competitive and is constantly bringing new products to market, all of which makes SAS a reliable partner," said Shahram Sharifi, credit risk director at Lloyds TSB.

Sharifi continues: "By identifying the business benefits of risk management at an early stage, Lloyds TSB will enjoy a competitive advantage in the lead up to the Basel II deadline."

A key issue for effectively managing risk is not only the quality of historical data but also the speed with which it can be analysed. Improved data capture at the point of sale enables the bank to monitor the performance of scorecards much faster. SAS is also being used to manage the data warehouse and to analyse and segment the data.

"With so many software vendors jumping on the Basel II bandwagon, successful vendors have to demonstrate not only their experience and knowledge of the risk market, but also their ability to ensure that organisations receive a clear return on their investment, which goes beyond just the compliance issues," said Peyman Mestchian, head of risk management at SAS UK.

"We are therefore particularly delighted that Lloyds TSB's decision to select SAS was part of a competitive tender as this illustrates that risk management is not just the flavour of the month."

A recent report by Forrester Research supports the need for risk management programs that look beyond compliance and that cover all the data management issues as well as analysis and reporting requirements. According to Forrester Research: "SAS provides the most comprehensive offering beyond pure Basel II compliance. The current offering of other applications focuses on how to become Basel II compliant - instead of improving visibility into risk exposure." (Source: Forrester Research, Inc, Turning Chaotic Apps Into An Opportunity, Forrester brief Basel II, May 2003)

SAS Risk Management for Banking is a flexible application that provides a consistent, coherent approach to managing credit, market and operational risk throughout an organisation while maintaining Basel II compliance. The solution incorporates credit scoring, which helps banks perform application and behavioural scoring to assess the credit worthiness of their customer base.