Basel III and Liquidity Risk Management Solutions: Balancing Compliance and Profitability

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2 December 2013
Cubillas Ding and Medy Agami

Abstract

The implementation of the Basel III requirements has proven to be a challenge for many financial institutions. Banks that were well-capitalized in Europe and the US under the Basel II requirements will find it hard to become compliant with Basel III.

Banks will need to carefully consider the timing of implementation for full compliance. Early adopters can signal strength and soundness in the marketplace, resulting in a competitive advantage. The laggards can take advantage of a more favorable operating environment, resulting in more profitable performance in the short term.

In the report Basel III and Liquidity Risk Management Solutions; Balancing Compliance and Profitability, Celent defines what Basel III questions banks need to answer before selecting an IT vendor. It also provides detailed descriptions of IT vendors and their offerings in each of the Basel III IT layers. This report profiles nine vendors that offer IT solutions that might be identified as key elements for banks to implement and improve their risk management framework and comply with Basel III. Some vendors offer multiple solutions that can cover one or more areas of Basel III, while others have a unique solution covering specific functional elements.

Firms need to have a clear view of what ambitions they want to achieve before building, selecting, or blending Basel toolsets. This means designing a risk IT architecture which delineates policies, rules, guidelines, and standards for the technical layers to support the evolutionary Basel journey toward end game risk management capabilities.

“Basel III should be looked at as a firmwide risk management initiative, rather than merely compliance with regulation.” says Medy Agami, Celent Analyst and author of the report. “We believe that the road to this goes through rigorous integration of risk management across the enterprise.”

The report examines and ranks nine vendors and their solutions in this space featuring Celent’s ABCD Vendor View, which presents a comparative view of the vendor marketplace that visually represents four elements: Advanced Technology, Breadth of functionality, Customer base, and Depth of client services. The vendors profiled in this report include: Axiom Software Laboratories, IBM Algorithmics, Kamakura, Misys, Moody’s, Oracle, PolarisFT, SunGard, and Wolters Kluwer.

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