NTC joins forces with Algo in bid to meet Basel II

Chicago-based multi-bank holding company, Northern Trust Corporation (NTC) has teamed up with Canadian risk management software provider, Algorithmics, to enhance NTC's enterprise-wide risk management (ERM) engine to meet key Basel II requirements.

NTC's internal systems will be upgraded with Algo Market, Algo Credit and Algo Limits to form a core risk ‘engine’ for the group to enhance credit analysis, reduce capital requirements and improve overall returns. NTC has also licensed the Algo OpRisk product.

The Algo functionality includes a Mark-to-Future (MTF) methodology which allows NTC to use a single architecture for credit and market risk management in its middle- and front- offices.

“This should enhance our day-to-day risk management decision activities, as well as the estimation of risk capital. Algo Market and Algo Credit will provide a variety of accurate, updated calculations to feed in to our BIS II-attuned risk engine," said Peter Magrini, senior vice-president of worldwide technology at NTC.

The proposed Basel II capital requirement will also require internationally active banks to implement comprehensive operational risk solutions that provide ongoing calculation and reporting of a firm's operational capital.

Algo OpRisk is intended to allow NTC to use the same MTF framework and risk analytics components that power Algo Market, Algo Credit and Algo Limits. This should provide an integrated, transparent and ongoing operational risk oversight.

Duane Rocheleau, senior vice-president of treasury for Northern Trust, said increasing regulatory emphasis for better management of capital was the key factor prompting an integratiion of credit and market risk measures.

An Algorithmics spokesman told RiskNews that implementation of the full suite of risk solutions, beginning with Algo Market, will start in Q2, and it is planned to have all systems running by the end of Q3 this year.