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The OFSAA journey at HDFC Bank: Staying compliant with Basel and IFRS

 

Learn how OFSAA was implemented in various stages at the Bank and how it helped them stay compliant with international banking regulations like Basel and IFRS.

Business context

In the mid-2000s, HDFC Bank’s meteoric growth had placed an extremely high load on their Risk and Finance architecture. Amidst all the operational chaos, the computational inaccuracy and functional limitations of siloed applications made it difficult to maintain regulatory compliance.

As a remedial measure, the Bank decided to implement Oracle Financial Services Analytical Applications (OFSAA) to stay compliant with various banking regulatory standards.

Solution deployed

The initial Basel II compliance was implemented in 2006 on OFSAA. In 2010, Oracle assisted the Bank to leverage an engineered Exadata system that reduced the Basel II completion time from 60 hrs to 10 hrs.

Subsequently, the system was updated to Basel III in 2015, and OFSAA was upgraded to OFSAA 735. This marked the inception of a Risk and Finance data model that was extensible, scalable, and easy to deploy.

In January 2019, to ensure compliance with the IFRS (International Financial Reporting Standard), Oracle and HDFC Bank implemented OFSAA for IFRS compliance. With this, the Bank was able to compute ECL (expected credit loss) with key integration done through Basel for inputs like PD, LGD, CCF, and Basel Asset Class attributes for ECL computation.

Benefits

Implementing Basel and its subsequent upgrades through OFSAA enabled the Bank to stay compliant with capital computation through quarterly submission to the RBI. OFSAA helped the Bank maintain its strong reputation of ethics and compliance, while avoiding regulatory fines. It has also helped the Bank to lower the cost of capital, while enhancing business agility and productivity.

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