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Are You Ready for Basel III? Capitalize on In-Memory Computing for a Real-Time View of Cash on Hand

When the financial crisis hit in 2008, it didn’t take long for the discussion to turn to new capital requirements for banks. Nearly seven years later, we’re looking hard at the Basel III accord and new rules regarding liquidity coverage ratios (LCR).

The basic idea behind LCR is simple: Lenders need to have enough cash on hand to withstand a run on the bank. But things get complicated quickly. Country-specific timetables for implementing solvency ratios, net derivative cash outflow and inflow amounts, maturity mismatch add-ons….I could go on.

What seldom gets discussed is how an organization actually knows how much cash on hand it has. I wonder if casual observers envision the CFO accessing a single account and looking at the balance – sort of like going online to see if you have enough to cover the mortgage. If only it were that simple!

So many transactions, so little visibility

The fact is, financial institutions – like so many other large businesses today – have a visibility problem. Transactions take place all over the world, in multiple branches, across millions of customers, and at any time of day. It’s hard to see what’s happening at a given point in time. Meanwhile, the industry itself is a poster child for business acceleration and change. Nothing stands still for long. 

At SAP, we’ve been keeping our eye on these developments, and we’re helping many of our customers meet the challenge. Key to the effort is the SAP Liquidity Risk Management application. One of the most important things to remember about SAP Liquidity Risk Management is that it’s powered by the SAP
HANA platform.

The need for speed

Why is SAP HANA important? It’s all about speed. SAP HANA is an in-memory platform – a bit like RAM on your motherboard, which is very fast compared to hard drive storage. Many companies still store and access data in relational databases stored on disk. SAP HANA stores it in memory, allowing you to aggregate and analyze hundreds of millions of cash-flow transactions from different sources in just seconds.

Sitting on top of SAP HANA, SAP Liquidity Risk Management gives you preconfigured business rules and calculation methods that easily adapt to the requirements of Basel III and of the proposed version of the LCR rule for the United States. Looking forward to your next stress test? Probably not, but
with this software you can run stress tests in real time – with less effort and more accuracy.

This gives you visibility and compliance – which, in fact, is a requirement of the new liquidity rules. Because of slow memory-access speeds and programming constraints, relational database technologies can’t do the  real-time reporting needed to  deliver an up-to-date picture of cash. And, in
the end, this is
why so many of our customers in the financial services industry are looking at the in-memory advantages of SAP Liquidity Risk Management powered by SAP HANA. For more information, drop me a line or visit us at Liquidity Risk Management | In-Memory Computing | SAP HANA | SAP

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