By Katherine Heires

Oracle Corp.’s financial services unit introduced two offerings designed to help institutions comply with the internal capital adequacy assessment process, or ICAAP, requirements of the Basel II accords by identifying, measuring and managing risk and capital across the enterprise.

"Market conditions have brought the role of risk management sharply back into focus," said S. Ramakrishnan, CEO of Oracle’s Reveleus and Mantas software units. "Financial institutions are closely examining the ways in which they can leverage the value of the internal capital adequacy assessment process." He added that the Reveleus ICAAP Analytics and ICAAP Assessments products, announced today, were developed over the past year.

Boston-based Celent estimates that global institutions have spent an average of $50 million to $100 million on their programs for Basel II, which requires for the first time that regulatory capital be set aside for operational risk. The mandate went into effect in Europe last year and is in varying stages of implementation around the world.

While many firms will adopt the software to help them comply with Basel II, said Ramakrishnan, some - hurt by the turmoil in the industry - will want to do "quick and urgent remediation of some of their risk management processes," to keep regulators and their boards happy, as well as newer stakeholders such as U.S. taxpayers. He noted that the offerings address all major ICAAP components, including risk assessment, risk monitoring, modeling, stress-testing, risk aggregation and allocation and regulatory reporting.

The tools were built to be integrated into and work cooperatively with a firm’s databases. "Even though these products come from Oracle, they have adaptors built into them so that practical integrations can be done," said Ramakrishnan, adding that a typical enterprisewide integration should take from three to six months.

Once installed, the ICAAP products can be used to estimate measures such as value at risk (VAR), conditional VAR and unexpected loss across categories and can allocate the values across lines of business. Although the tools can be used on a stand-alone basis, Oracle says they are compatible with the other Reveleus solutions, including Basel II, Market Risk, Operational Risk Economic Capital, Economic Capital Advanced and Asset Liability Management. According to Celent, Reveleus customers include Citigroup, Wells Fargo & Co., Wachovia Corp. and Investec.

Ramakrishnan said the ICAAP tools can help senior executives view activity across the divisions in a bank using a Web browser. "There are 50 to 60 different types of dashboards that the platform offers that are continuously monitoring risk and capital inside the institution," he said. Because the products are expected to have a relatively small number of users within a firm - generally less than 100 executives - they will be priced below $1 million, he added.

Cubillas Ding, a senior analyst in Celent’s securities and investments practice, said that although there are numerous competitors in the Basel II compliance market - Algorithmics, Iris Financial Solutions, Fermat, Quantitative Risk Management, SAP, SAS and SunGard Data Systems, to name a few - "no one has quite packaged a solution in this way, specifically highlighting ICAAP capabilities." Oracle is providing "a framework for addressing ICAAP with an out-of-the-box flavor," he said.

While the IT spending outlook doesn’t look good for the financial services industry, "regulators are on the backs of institutions to make sure their compliance practices are sound," said Ding. If the solution helps banks work well with regulators and provides the transparency needed to stay on top of risk capital levels, it could gain some traction, he noted.

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