TRASSET

TAG-case studies

Client Successes

Al Rajhi Bank - One of the largest Islamic banks in the world, having a market capital of US$4 billion and a vast network of over 400 branches, 2000 ATMs, 15000 POS and 100 ladies branch, has successfully implemented our Islamic Banking Solutions.

A. Case Study - Islamic and conventional banking

Area: Treasury Our client requested TRASSET to implement a new, fully integrated, STP treasury system, covering both the conventional and Islamic treasury activities. We will concentrate now on the challenges met during the project and the benefits brought by TRASSET.

Business needs The need for a new treasury system was generated by the fact that:

  • the Bank is very active on the Interbank Islamic money market. The Bank offers a wide range of Islamic products, which have to be managed according to the Shariah rules, requiring not only management of different products and related calculations but also a complex workflow management.
  • On the conventional product part, there was a need for an STP system which is fully integrated with all of the other in-house systems of the Bank in order to cater for a consolidated bank level position/exposure to be covered
  • Some of the key challenges a. Islamic products The challenge in managing Islamic products is basically manifested on the workflow part of the transactions. A typical Islamic interbank product will include as underlying a commodity deal. Given this feature of the products, there are a number of departments involved within the Bank: Sales, Investment, Back Office, Finance. The processing of one transaction will start from the Sales Desk, and then there are several steps which have to be strictly followed by the different desks during the deal processing in order to meet the Shariah requirements. Each and every commodity buy and sell transaction belonging to the master deal has to be preceded by exchanging of signed documents (parties involved in case of a Direct Investment deal: Bank, client, broker, third party) - these include documents on offers made by the bank, documents on acceptance signed by the client, documents attesting the ownership of the commodity prepared by the broker. These have to be generated, printed and/or filed electronically. This also means that there is a continuous communication between the Sales desk (communication with the client and third party) -Investment desk (communication with the commodity broker) and Back Office departments (settlement of the deals), where the departments involved have to let kno w the other involved parties that the deal is ready to processed on their side. Now one of the main challenges is to monitor the process properly and offer the parties involved a workflow tool, which:

  • only allows steps/actions to be performed which are authorized for the desk- thus clearly defining the individual responsibilities of the different desk/departments
  • only allows steps/actions to be performed which are allowed at that particular stage of the process - thus making the process safe and Shariah compliant
  • displays automatically/real time to the different parties the deals under processing and indicates when an action is due on their side - proper and fast information flow
  • automates all of the action items which are part of the workflow, like settlement (payment generation), document generation (e.g. automated printing of the documents to be signed and to be faxed to the client/broker),status change of the deal, etc.
  • The automation of the information exchange has been a considerable problem in the Bank: the average turnaround time of the deal processing was high. b. Conventional Treasury Another headache was caused the fact that the liquidity monitoring was extremely hard to be done in the lack of an integrated system which monitors the maturities of the deposits taken and placed. Key challenge was the real-time control of the client exposures during the deal input - having manual processing of the deals, this was not possible, causing huge exposures to the Bank. There was a huge mismatch in the Bank between the position known by the dealers on the FX desk about the overall position of the bank and the position generated in the General Ledger. Lot of activities/transactions are done outside the treasury (most important: the activity of the branches), which were not reflected properly in the positions covered by the Bank. Straight through processing was missing from the Treasury activity: deals already done through the Reuters Dealing have been input manually in the system, then deal tickets printed out and handed over to the Back Office for settlement. On their side, Back Office users were using the SWIFT (BESS) terminal to initiate payments by manually keying in the payments. How TRASSET implementation helped - Benefits All of the Islamic MM deals have been input in the TRASSET system as concerning initiation and processing, thus the need of manual processing (e.g. Excel) has been eliminated. Proper control of the processes ensure that the deals are managed based on the strict rule of the Shariah - at the same time offering the possibility to have the workflow modified any time the rules are changed by the Shariah Board or the management. Having a control on the steps done by each desk (including the turnaround times), a proper performance monitoring process was put into operation by the Management of the Bank. At the same time the average turnaround time of processing one deal was decreased to the 1.5% (!) of its original value. Considering the importance of being able to react fast to the market movements, this has been one of the key elements of the success of the project. The straight through process implemented has reduced considerably the paper based communication; at the same time fully eliminated the need of looking after deals which have been “lost” between desks. Deals done e.g. on the FX market are automatically imported from the Reuters Dealing, approved in Front Office - then Back Office does not need any documents or to manually re-input the deals, just will check the settlement instructions. After their approval is also done, the system will automatically generate and send the payment messages (SWIFT and domestic payments) - and at the end of the day GL posting is automatically done by TRASSET. So this we can really call a comprehensive STP processing and fully integration of the activities of the different departments. Other main benefit of the STP process is that TRASSET will monitor real-time the limits of the counterparties: each sales user will now precisely at the moment of the initiation whether the deal will cause limit excess (preliminary limit control). TRASSET is also managing investment accounts of the clients having deposits with the Bank through DI deals. When maturity is due, the amounts can be automatically transferred to the Loro account of the client or to any external bank account. Being able to monitor the maturities of the deposits taken and placed for any future period, the system is giving precise information of the liquidity situation of the bank for any future date, offering the possibility for the liquidity management department to proactively act on the interbank money market through placing or taking deposits. Key success was also the realization of the real-time/on-line interface between the TRASSET (position keeping) and the branch core system. TRASSET is linked now to the core system of the bank, thus the dealers can import any time and with any frequency the positions of the branches: Sales/Branch desk within the Treasury will initiate the import, and then will transfer the position to the Foreign (and Domestic) currency desks for covering it on the market. The import can be run manually by the sales dealers any time and with any frequency, moreover the transfer to the FCY desk is fully automated, with the transfer prices computed automatically based on some system parameters (which can be also modified easily by authorized users). Since the bank has more than 400 branches, the impact on the accuracy of the new bank position management is enormous.

    B. Case Study - Debt Management Agency

    Area: Governmental Treasury The close cooperation of our client and the EU needed a more transparent financial environment in the governmental area. The European Agency for Reconstruction, the dedicated organization of EU for supporting the region, prepared an RFP for a new Financial Management Information System to be delivered for the central institutions of the state sector: Ministry of Finance Treasury and the National Bank. Within a HP lead consortium TRASSET succeeded to win the delivery of the Integrated Debt and Liquidity Management Solution and the Integrated Foreign Reserve Management System. In this study we will highlight the benefits brought by TRASSET on the field of integration, automation and operation security.

    Business needs Ministry of Finance: The Debt Management Department within MoF managed its duties with the use of Excel tables and a lot of paper work. The MoF-DLM team desired a stable and integrated environment with market information connection, secure portfolio management, automated settlement and accounting and fast reporting; with the possibility to support new organization structure and future outsourcing of activities into a sovereign agency. Key challenges Ministry of Finance: The project also incorporated the transfer of government debt related responsibilities from the Central Bank to the Ministry of Finance, which institutions do have sensitive political connection in every country. The migration of the debt stock was a very long process, because besides the above mentioned special environment the historical debt portfolio contained very special and structured elements such as IMF and Paris Club loans. The project was challenge from HR point of view also, because during the project there were parliamentary elections and huge political changes. The overall solution delivered within FMIS contained also applications for Budget Execution and Accounting Departments, which indicated a different internal cooperation inside the Treasury, what was not so easy to achieve.

    How TRASSET implementation helped - Benefits Ministry of Finance: The new solution integrated the internal work inside the MoF Treasury, provided a secure and reliable environment for debt management:

  • integrated positions and debt stock
  • real-time market information access
  • proven methods of liability calculation
  • secure and stable environment, with tailor-made permission control
  • automated settlement processes
  • fast and flexible accounting and reporting
  • The need of manual processing and paper work which included a high operation risk (e.g. Excel) has been eliminated. The application supports the restructured organization and increased duties with STP and is already capable for the outsourced operations as well.
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