SPSS - Customers

Banca Lombarda

Situation

Gruppo Banca Lombarda, headquartered in Brescia, Italy, is one of Italy’s top 10 banking groups. Like most banks that adhere to international guidelines, Banca Lombarda needed to revise its approach to measuring credit risk. The change was prompted by a new capital accord issued by the Basel Committee (so named because it meets in Basel, Switzerland) that becomes effective in December 2006.

Challenge

The Basel Committee, which falls under the auspices of the Bank for International Settlements, comprises central banks and regulatory authorities from the United States, Canada, Japan, and Europe. It is tasked with establishing uniform standards so that banks from different countries can compete with one another on a "level playing field." Among its many provisions, the new accord, known as Basel II, introduced an internal ratings-based (IRB) approach for evaluating credit risk. Credit risk is risk due to uncertainty about a bank's counterparties—from individuals to sovereign nations—meeting their obligations.

Under the approach, a bank is able to make its own assessment of a borrower's creditworthiness in determining its basic capital requirement. However, to obtain authority to use the IRB approach, internal rating models must be an integral part of the bank's procedures for credit risk control and broadly used within the organization.

Solution

To help implement the changeover to an IRB methodology, Lombarda Systems and Services, the organization in Banca Lombarda Group responsible for technology and logistics services, turned to IBM and SPSS Inc.

PASW Modeler, the enterprise data mining workbench from SPSS Inc., was used to analyze Banca Lombarda’s data store of customer information. With the software, Banca Lombarda could build the credit risk analysis algorithms and tools that could be run against a multi-bank credit data warehouse created from various operational sources.

A key factor in the decision to use PASW Modeler was its tight integration with IBM DB2 Universal Database Enterprise Server Edition V8.1, which is deployed throughout Banca Lombarda Group. PASW Modeler capitalizes on the stability and performance of DB2 to increase data mining productivity and returns.

PASW Modeler also performs critical data preparation, modeling and model scoring tasks—all within the database. Its intuitive, visual workflow interface allows users to conduct "train of thought" analysis so they stay focused on business objectives rather than on performing technical tasks.

"PASW Statistics is the main solution at Banca Lombarda Group for integration with our DB2 data infrastructure and for the analytical needs of the rating system," said Giacomo Petrini, vice president of credit risk. "With SPSS Inc., we can manage both statistical techniques and data mining processes."

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PASW Statistics and PASW Modeler are the main solutions at Banca Lombarda Group for integration with our DB2 data infrastructure and for the analytical needs of the rating system.
— Giacomo Petrini
Vice President of Credit Risk
Gruppo Banca Lombarda

Results

By year-end 2006, when Basel II becomes effective, Banca Lombarda Group expects to realize these benefits:

Its own internally assessed credit risk profile to calculate capital requirements
Methods, procedures, and technological tools to better manage risk
More effective balance sheet management
Increased efficiency and competitiveness

And there is more. With the experience and knowledge gained from the credit risk project, Lombarda Systems and Services is now using SPSS Inc.'s predictive analytics software and DB2 to help the marketing department run more effective direct marketing campaigns and improve its contribution to the bottom line.

Combining forces

SPSS Inc. participates in IBM PartnerWorld® Industry Networks, which offer a rich set of incremental industry-tailored resources to all PartnerWorld members who want to build their vertical market capabilities and attract potential customers in the markets they serve worldwide. Whether a company focuses on one or more industries—or serves small, medium or large companies—IBM has the technology and resources to help members more effectively meet their clients' needs.

Industry alignment

SPSS Inc. is a member of the banking and insurance industry networks and has reached "optimized" status in each, which means SPSS Inc. has developed further specialization by optimizing its applications with IBM on demand technologies, achieving success with its own on demand solutions and other criteria.

"Aligning development and marketing efforts by industry allows us to build on each company’s expertise and respond with specific business solutions that showcase the value of our predictive analytics and IBM’s powerful business intelligence platform," said Kate Tickner, strategic alliances manager for SPSS Inc..

For more information on IBM on demand technologies, please visit ibm.com/ondemand.