Postbank Germany

Case Study: Postbank – Credit Business

If a customer no longer pays their loan instalments, this has consequences for Postbank: risk provisions have to be formed for expected payment defaults because otherwise the payment default would have an impact on the income statement. Collenda’s software solution keeps an eye on all the figures and sounds the alarm early – quickly, reliably and transparently for everyone.

The customer has always paid their instalments, month by month, year by year. Suddenly, however, the payments stop. There can be a number of reasons for this. Maybe they have just overdrawn their account briefly, or they are temporarily ill. Perhaps they have lost their job and cannot pay the remaining instalments any more for the foreseeable future. The alarms sound at Postbank. In the worst case the remaining debt will have to be completely written off. While the bank clarifies with the customer whether and how they will be able to pay at least part of the instalments, it has to form risk provisions for the expected payment defaults and also display these in risk controlling, accounts and reporting. In addition, the profitability of the relevant product will deteriorate. This shows that a credit default affects many departments of the bank.

Integrated solution instead of manual work

In the past, every department involved largely had to record payment receipts and defaults manually in their own Excel list or database. This was associated with a great deal of maintenance and coordination effort and was highly prone to errors. For this reason, at the end of 2011 Postbank began the launch of the Collenda – Banking system.

The Collenda solution covers a variety of functions across the entire process chain with one integrated solution. From early warnings through restructuring up to settlement and collecting loss data for rating models. The standard software networks all the departments involved, provides a uniform and transparent database and offers standardised processing. One of the big advantages is that current data is available at the touch of a button at any time. This is important, for example, for flash reporting, monthly closing or ad-hoc enquiries, from the BaFin for example. The software has been adjusted to the individual requirements of Postbank, such as products and processes, in close cooperation between IT and the relevant line departments. The interfaces to existing systems in the departments involved also had to be created.

The launch was completed by the end of 2014. “Collenda has enabled a substantial stabilisation of our processes and a transparent data basis. The system is much faster and of higher quality than manual recording. It has been possible to replace a whole range of individual DP solutions and stop duplicating work,” emphasises Günter Fiebach, Senior Project Director Risk Advisory in the CRO Department of Postbank.

Conversion to IFRS9

In a further step Postbank and Collenda had to overcome a complex regulatory hurdle at the beginning of 2016. The conversion of credit risk provision formation to the new reporting standard IFRS 9 began at the end of 2017.

The new calculation model made extensive changes to the Postbank backend necessary. These include launching a cash flow generator and implementing a framework for the Collenda model development. Thanks to the cash flow generator, all payment flows that are necessary for the changed credit risk provision formation under IFRS 9 over the entire term of a loan can be depicted for a credit transaction. Of course, this is only done for transactions for which there are no cash flows at Postbank in the supplying systems – current accounts, for example. With the provision of the parameter engine by Collenda the model development for IFRS 9 at Postbank was also introduced.

Matthias Göthel, Technical Project Manager for the conversion to IFRS 9, came to a positive conclusion after the completion of the project. “Today, it is possible for Postbank to conduct further model developments within the shortest space of time and to implement these productively. With the final implementation of IFRS 9 at the beginning of 2018 it is now possible to calculate the entire IFRS9 credit risk provision in the software suite daily. So now we have the possibility to react quickly and securely to market and growth fluctuations.”

As a supplement to the technical results, we have now been able to reach a high degree of automation in IT operations, including complete integration of the solution in the entire IT architecture of Postbank and its subsidiaries, with a variety of interfaces from supplying systems and to customer systems. Furthermore, it has succeeded in getting on top of the high and continuously growing data volumes at Postbank, in particular with IFRS 9, and can ensure stable and good performance of the system in daily operations. And alongside classic projects, the IFRS 9 models can be developed agilely and go-live productively – making prompt and flexible implementations possible.”Cornelia Goulnik, IT Programme Manager for the launch of Collenda BANKING and the conversion to IFRS 9