30 Minute Interview

“Adhering to Basel II norms is on the agenda of all major banks”

S Ramakrishnan, Chief Executive Officer, Reveleus (an i-flex company), on the importance of Basel II and other regulations that will affect the adoption of IT in the banking and the financial sector.

S Ramakrishnan Chief Executive Officer Reveleus

Are Indian banks under pressure to comply with regulations vis-a-vis IT spending?

In recent times, banks and financial institutions are feeling the need to comply with regulations, which are important for the credibility of the institution. The reputation of a financial institution is at risk if it fails to adhere to regulations such as the Sarbanes-Oxley Act and the Basel II, which entail a lot of cultural change on part of a financial institution. The change implies a complete process change-over, which means all the records need to be digitised and the right kind of software is to be deployed to manage the digitised records. The anti-money laundering software is crucial. The implementation of this software requires core replacement strategies in the IT infrastructure of a financial institution. Larger the institution, greater the challenge. In India there has been a widespread initiative by Reserve Bank of India (RBI) and they are serious about it. We can hope to see adherence to different regulations by Indian banks soon, especially by those who have operations across the globe.

Do you expect most banks to comply with Basel II in the near term?

Adhering to Basel II norms is on the agenda of all the major banks of the world and it involves collecting and keeping track of data pertaining to every loan and maintaining it. The Basel Committee on Banking Supervision, an arm of the Switzerland-based Bank for International Settlements, has defined the Basel II capital adequacy requirements for global banks. One of the committee’s principal goals is to reduce risk in the financial system worldwide by aligning each bank’s capital requirements to accurately reflect its credit, market and operational risks. Complying to Basel II norms will require a wide range of initiatives on part of banks as their IT processes have to be in place and high level of automation is needed to adhere to these norms. The greatest challenge in adhering to Basel II norms lies in bringing every institution that is at a different level of IT adoption and automation to a common standard. I hope to see a large chunk of major banks in the world adhering to the Basel II by the time frame of October to December 2006.

Tell us about some of your recent customer wins as part of Basel II compliance?

We have had a large number of customer wins in the Basel II space. We have customers such as Wells Fargo Bank, Lloyds TSB Group, a UK-based financial services group, and Citigroup that have all gone in for the Reveleus Basel II solution. We have also recently tied up with Oracle to resell our Basel II solution and the recent customer win in the form of Wells Fargo, which is a strategic Oracle customer is a result of this alliance. In India we are working on gaining accounts in the Basel II space.

Can you describe some Basel II projects being implemented by your clients?

Wells Fargo Bank is aiming at leveraging its existing processes and structures to comply with Basel II norms and Revelus is all set to facilitate the bank to accurately measure and manage its capital requirements in a timely and consistent manner. Similarly the Citigroup has selected Reveleus to support its Basel II processing for the United States and local jurisdiction where it operates. Citigroup selected this solution after an extensive evaluation process over the course of several months. The solution will be implemented across all lines of business at Citigroup. The Lloyds TSB Group had selected Reveleus Basel II solution to meet the capital adequacy requirements as prescribed in the Basel II accord. The solution’s implementation will bring policies and methodologies in accordance with the standards outlined by the Financial Services Authority (FSA). The solution’s calculation engine is expected to ease the complexity of adopting the Internal Ratings Based Approach for Credit Risk. The solution will also integrate multi-jurisdictional data from the securitisation team and apply capital adequacy calculations, which will roll up into Lloyds TSB’s corporate Basel II framework. The Reveleus Basel II solution will also support the requirements of complete supervisory reporting and disclosure.

— Abhinav Singh