- Referencje
- Standard Chartered Bank
Stress testing becomes competitive advantage with advanced analytics
Scenario-based analytics platform forecasts impact of crises on financial statements.
Confident forecasting
for regulatory compliance, P&L and balance sheet projections
Standard Chartered Bank achieved this using • SAS® Solution for Stress Testing
Standard Chartered Bank uses SAS Analytics to meet stress-testing requirements and assess the effect of crisis scenarios on its future P&L and balance sheet
With a presence in 59 markets – and the only international bank present in all 10 ASEAN markets – Standard Chartered Bank is one of the most highly rated banks in the world. Standard Chartered has made great efforts to strengthen its scenario-based analytics capabilities – a distinct advantage in the current volatile economic, political and financial climate.
Building on a platform originally designed for compliance with IFRS 9, Standard Chartered partnered with SAS to create a scenario-based analytics platform (SBAP). While the SBAP was initially intended as a tool for regulatory stress testing, Standard Chartered has expanded its use strategically to assess the impact of multiple crisis scenarios on the bank’s future financial statements.
Working with SAS, Standard Chartered is now able to calculate the impairment cost of a crisis and the resulting impacts on the bank’s income statement and balance sheet. This has allowed the risk analytics capabilities at Standard Chartered to gain both scale and scope. “We started out being driven by regulation, but now we are also driven by senior management wanting to understand the implications a crisis will have on our financial statements,” says Daniel Gelinas, Head of the Stress Testing Strategic Program at Standard Chartered. “With that, they will make decisions around staff bonuses, dividend payments, how much to invest and which markets to focus on.”
The stress-testing process is highly complex for a global bank like Standard Chartered, given its geographical footprint and sophisticated business model. The adaptability of the SAS Solution for Stress Testing allowed Standard Chartered to address its growing business needs.
“We needed to massively augment the capability of what was in the IFRS 9 solution with a large number of other models and a large amount of other capabilities and calculations,” says Gelinas.
This meant extending the IFRS 9 platform with models to project assets, liabilities, net interest income, non-interest income, operational cost, operational and market risk weighted assets, tax and bank levies. Working with SAS, the bank was able to incorporate these models as integral components of the SBAP.
We made a giant leap in terms of our capability in stress testing because of SAS. Daniel Gelinas Head of the Stress Testing Strategic Program Standard Chartered Bank
Achieving its goals of stress testing
The output of the modeling process is a set of stressed projections. “The IFRS 9 stress models give us an output for the impairment level for retail and wholesale, and we merge all this together with our balance sheet projection,” Gelinas says.
This is then run in what he calls Standard Chartered’s “central solution,” which is the bank’s capability to look at a combined risk and finance number within a single view.
“Never before in the organization have we had a process where the risk and finance numbers are integrated and optimized,” Gelinas says. “Now if your balance sheet goes up, your risk level would also go up, and you’ll understand what kind of underwriting criteria you have generated to balance your revenue with the risk profile within the organisation.”
The output is a full balance sheet projection and P&L statement for each of the forecast periods. This means that scenario planning for a five-year period will provide the team insights into how much profit can be expected each year. With this, Standard Chartered can fulfill its ultimate goal of stress testing – to ascertain the sustainability of the bank over its capital funding position.
“We now have the capability to look at risk and finance numbers, and bring them together into a single view,” Gelinas adds.
“Our platform has been projecting yearly results, but we are now in the process of being able to project quarterly results,” he says, emphasizing the scalability in conducting scenario analysis using SAS. “We could run analysis on the SBAP with the bank closing balance sheet every month if we wanted to.”
When asked about the benefits of the SBAP, Gelinas emphasized how the Prudential Regulation Authority in the Bank of England had recently lifted some capital requirements on account of Standard Chartered’s growing strength in stress testing. Standard Chartered is now able to run stress testing across the bank and deliver annual stress tests to the Bank of England.
The SBAP also has been instrumental in meeting regulatory requests during the COVID-19 pandemic.
“The landscape for stress testing changed completely,” Gelinas says. “The regulator asked us to focus on the potential impact of COVID-19 on the bank. In 2020, the bank ran a large number of COVID stress tests on the implications of finance performance over the next two to three years. Without the SBAP platform, we would not have been able to deliver this capability to the organization.”
Centralizing stress testing for global execution
Standard Chartered’s efforts in building a competitive advantage around risk analytics and intelligence are instrumental in the bank’s successful digital transformation. Standard Chartered is currently working with SAS to migrate the SBAP to a centralized and more powerful, faster and nimbler second generation, with the aim of gaining greater efficiency in managing data. There are plans to make the platform available to as many as 20 regions, entities and countries by the end of 2022, as it becomes a Center of Excellence (CoE) for groupwide and country-specific stress testing.
“The SBAP is the vision of the future,” Gelinas says. “We plan to use it across the organization as the mainstream tool to run our sensitivity-based analytics. The goal is to onboard every country that is producing a regulatory stress test within the next couple of years. Additionally, we have moved the whole of stress testing from the risk function to the finance function. This is to integrate the forecasting activities with our stress-testing capabilities. Stress testing and scenario-based analytics will provide insights into corporate plan, risk appetite and prioritization of our investments.”
Standard Chartered Bank – Facts & Figures
A leading international bank with networks across Asia, Africa, the Middle East and beyond
SBAP – Full balance sheet projection and P&L statement for forecast periods
2021 Smartest Bank in Asia award at IDC Financial Insights Innovation Awards 2021
SAS brings easy integration and advanced tools
From the beginning, Standard Chartered wanted to build a scalable and flexible stress-testing platform that was based on open standards. According to Sham Thakur, Standard Chartered’s Head of Enterprise Stress Testing Technology, one of the major reasons for choosing SAS as the main vendor for the SBAP project was that the SAS solution allowed for easy integration with other tools and software in the market.
The bank’s practice of running models in many programming languages aligned with the openness of the SAS analytical platform, laying the foundation for a strategic partnership. The bank was also impressed with SAS’ ability to connect risk and financial data.
“SAS has been our main partner in this journey, and they have been able to help us on integrating the platform,” Thakur says. “We made a giant leap in terms of our capability in stress testing because of SAS,” Gelinas adds.
Looking back, Thakur said that choosing SAS as the correct technology partner was crucial in allowing the stress-testing platform to continually adapt and grow on its transformation journey. He recalls that an out-of-the-box solution that met the exact demands of the bank did not exist when the journey started three years ago. This is why the bank had to put together various best-in-class tools, powered primarily by SAS Analytics, which helped the bank build its customized stress-testing platform.
“Right now, our main partner is SAS – the partner that we would discuss the most with in terms of migrating our capabilities into a second generation,” Gelinas says.
Standard Chartered earned industry recognition for its achievements, winning the 2021 Smartest Bank in Asia award for its SBAP at the IDC Financial Insights Innovation Awards 2021.