Risk management services provider of the year: Wall Street Systems

A powerful real-time risk-calculation engine, consistent high-quality support and broad central-banking experience make this treasury management offering the best in class
Frederic Excoffier Wall Street Systems
Frederic Excoffier, Wall Street Systems

Central banks, in common with other market participants, have undergone rapid changes in recent years. The use of unconventional policies coupled with low interest rates around the world and changing market structures has encouraged central banks to turn to new asset classes, exposing them to new risks. At the same time, many have been operating with legacy systems built in-house many years ago.

In such an environment, an automated system for straight-through processing, backed by real-time risk management has the potential to deliver dramatic benefits. Wall Street Systems offers such a product, which has been rolled out across 35 central banks since 1994. A number of them have praised the company's outstanding service and detailed knowledge of the needs of central banks as key reasons for choosing its risk management services.

Wall Street Systems' off-the-shelf system is tailored to central banks and was first implemented at the National Bank of Estonia. It offers a single system, applicable from front to back office, which includes analytical tools to support investment decisions, benchmarking and performance management, a common framework for reporting and real-time risk management.

"We have a powerful risk-computation engine," says Frederic Excoffier, a project director at Wall Street Systems who works with many central bank clients. "This generates hundreds of key figures for valuation, risk management and down the line for accounting. It all comes from the same calculation engine at the start."

The risk management tool covers business, market, liquidity, credit and operational risks, and it supports Monte Carlo, historical and parametric value-at-risk modelling, enabling users to drill down into the figures if they want to. They can also import additional information on volatilities or correlations from different market sources.

Success in Ireland

The latest implementation was at the Central Bank of Ireland, which signed the contract in February 2014, and the final system went live in March 2015. Projects begin with an in-depth discussion of the central bank's needs and required scope. Wall Street Systems then configures the system, building in any additional features that are needed, before installing it at the bank, training staff and testing the technology for the final go-live.

Frank O'Neill started out as the Central Bank of Ireland's deputy project manager on the Wall Street Systems project, but was later promoted to full project manager. The firm's knowledge of central bank requirements set them apart from its competitors, he says. "From the very beginning it was obvious they had a clear understanding of our business." The system met "virtually all" of the bank's requirements without needing adaptation and the price was competitive too.

During the project, the European Central Bank launched its asset-purchase programme and the system had to be adapted accordingly. The process went smoothly though, without affecting the go-live date. Excoffier says it helped that the ECB's action came towards the end of the project. "By this time the central bank staff were able to implement most of the changes themselves, and only relied on us for support and to review the changes."

A key benefit for the Central Bank of Ireland was the reduction in risk brought about by the integration of diverse elements of its work into a single platform, allowing it to invest in a wider range of instruments. "A lot of items on our risk register would have been there as a result of non-integration between different business functions," says O'Neill. "These risks were more or less written off when the product went live."

Strong support

Another client of Wall Street Systems is the National Bank of Georgia. Giorgi Laliashvili, head of the central bank's financial markets department, says the system has not only improved efficiency, but also transformed operations. He recounts how slips of paper that were formerly used for recording trades used to make a ‘journey' from floor to floor of the central bank, being signed and stamped by different departments.

"A lot of things are now done in a different way," he says. "The system allowed us to invest in new instruments and implement new investment strategies. It eventually helped us manage reserves in a better way."

Both Giorgi and Keti Nadirashvili, head of the centralised risk management department, emphasise the developer's high level of support. "We are not a large central bank, so one might think we are not as important. To the credit of Wall Street Systems, we never felt underestimated or like a second priority," Laliashvili says.

Nadirashvili says the relationship was very good, with senior managers at Wall Street Systems consistently involved and support services immediately available. "Even for minor problems we always got very prompt support, even when getting it from offices in different time zones," she says. The onsite team built a rapport with Georgia's central bank, she adds. "Eventually, we became a very friendly team, working to achieve the same goal. It was hard work at times, but we really enjoyed the project overall."

O'Neill also points to the high level of service from the firm: "The support element was way over and above what the usual offering is."

Another key advantage is the central banking user group, organised by the ECB. This allows central banks to share expertise with one another and discuss the improvements they would like to see. Teemu Virtanen, director of government sales at Wall Street Systems, says 35 central banks acting together "form a very powerful unit" and exert significant influence over upgrades to the product.

Indeed, Wall Street Systems is constantly upgrading its offering and central banks often sign up for a five-year period, after which they will install the latest version. One upgrade in the pipeline is support for ISO 20022 payment messages, which are important for the ECB's Target2 and Target2-Securities systems.

The firm is also in talks with new central banking clients and hopes to sign a new deal soon. "We are looking forward to signing with the 36th central bank in the near future," Virtanen says.

The Central Banking awards were written by Christopher Jeffery, Tristan Carlyle, Daniel Hinge, Arvid Ahlund, Dan Hardie and Rachael King.

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