Chase To Implement Global Intraday Credit Risk Reporting

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CHASE Manhattan Bank plans to revamp its credit risk management operations by switching to an intraday system of global credit limits reporting.

The new global credit reports will be distributed across the bank's global intranet to 500 traders, risk managers and other staff, according to Chase officials.

Martin Weinberg, Chase's vice president of cross-product management information systems, says the credit reports will be generated from raw transaction data by an internally developed credit risk calculation engine, based in the bank's New York headquarters.

Chase's new credit reports will cover the bank's derivatives and foreign exchange businesses, says Weinberg. They will list each counterparty's global credit line, how much of that line has been used, as well as warning conditions and over-limit indicators, he adds.

The reports will be updated and published on Chase's intranet three times a day, timed to coincide with markets opening in Europe, North America and Asia. The bank will also publish foreign exchange settlement risk reports every hour, says Weinberg.

Chase's intranet project will allow the bank to manage its credit risks more efficiently, says Weinberg. He explains that the bank's global offices currently measure their credit exposure at a local, branch office level.

But once the intranet project is live, these offices will all have access to the bank's global credit risk picture, says Weinberg. "Chase's Manila office will look at the same global information as New York. Before this, Manila was only concerned with its local information," he adds.

Weinberg says Chase's decision to switch to bank-wide credit risk exposure reporting was prompted by the large number of bank customers that do business with a number of different locations.

"The bank could lose netting benefits if each location is not allowed to see the bank's credit exposure as a whole," he adds.

This global credit risk information will provide each bank location with a more accurate picture of which customers it can and cannot trade with, he says.

Weinberg adds that the new global credit risk reports will avoid "overstating risk" at the bank -- thus minimizing lost market opportunities.

Autumn launch date

Chase is currently testing its new credit risk intranet system with bank users, says Weinberg. The new reports are expected to go live this autumn, he adds.

The bank decided to use its intranet to distribute the new credit risk reports because of the open nature of Internet-based technologies, says Weinberg.

In particular, the reports can be viewed on any PC or Unix workstation equipped with a standard Web browser. "The whole point is that I don't have to know what is on each person's desktop," says Weinberg.

Java and Acrobat

The intranet application that distributes the credit reports is written in the Java programming language, says Weinberg. The credit reports themselves are sent out as Adobe Acrobat files.

Recently, Chase went live with an internally developed VAR system based on historical simulation (RMO, May 19).

Chase also offers its Charisma risk management system to its institutional clients. Charisma is a scaled-down version of the system that Chase's risk managers use to measure market risk on the bank's trading activities.