Simulation and planning tool
Bank of China has been active in Germany since 1989 and is the first of the five large Chinese national banks to operate in the country. Besides its headquarter in Frankfurt am Main, Bank of China has subsidiaries in Hamburg, Düsseldorf, Berlin and Munich. With a focus on euro clearing, import and export financing and syndicated lending, the bank has grown considerably in recent years. Today, the bank has more than EUR 10 billion in total assets. Additionally, the Frankfurt office is the central clearing house for trading CNY in continental Europe. Besides growth and rising complexity, stricter regulatory requirements are increasing the required number of KPIs to be monitored in bank management as well as their interdependencies. In order to manage this complexity, the Bank of China decided to implement a comprehensive simulation and planning tool especially for P&L and capital planning.
1. Systematic: the implementation
The described project was based on a conceptual design project in which the project team defined the functional requirement framework and the fundamental KPI framework. This was then used to introduce the simulation and planning tool from the zeb.control software. The implementation occurred in two phases: the technical implementation and the development and realization of relevant scenarios and employee training. In the first phase, zeb analyzed the existing data together with Bank of China in order to ensure the availability of required data and to define the data supply. Based on this, zeb then conducted the technical implementation including the installation and realization of technical interfaces. All management KPIs that had been defined by the bank were taken into account so that the tool was basically implemented by the end of the first phase. In several joint workshops during the second phase, the project team developed the relevant parameters and scenarios and implemented them in the tool. This involved general information such as about maturities in new business, planned margins and margin developments to be simulated, expected RWA weightings of individual products and various scenarios for the development of interest rates, currencies and balance sheets. In addition, zeb trained the bank employees in how to operate the tool to enable independent use.
Relationship between existing information and defined scenarios
2. Effective: the results
Upon completion of the project, Bank of China has a comprehensive simulation and planning tool for regular use. This considerably improves the quality and efficiency of analyses compared to manually maintained Excel files, while simultaneously reducing the complexity of data processing. The tool also offers wide-reaching application options such as P&L and capital planning, ad-hoc analyses and simulations of diverse KPIs by using various scenarios. The currently simulated KPIs relate to the dimensions of profitability, profit and loss statements, balance sheet structure, capital resources and the liquidity situation. Bank of China is now able to fulfill external regulatory requirements and internal economic requirements and to include all significant KPIs in bank management decisions.
3. Future-proof: outlook and conclusion
For Bank of China, the implementation of the simulation and planning tool represents a major component in the future-proof development of its bank management. Operational processes such as regular analyses and reporting as well as planning are conducted more efficiently and fulfill all requirements of internal auditing. In addition, various scenarios are used to establish a sound basis of information to assist the management board in making strategic decisions. The bank is thus addressing the increasingly volatile market environment and making an elementary contribution to its long-term success.