Oracle Corp. (ORCL) recently launched its new financial services software, namely Oracle Financial Services Liquidity Risk Management. The new software will help banks to efficiently and effectively assess their liquidity risk.
Financial Services Liquidity Risk Management is fully compliant with Basel III guidelines for liquidity risk management issued by Bank of International Settlements (BIS). The software can calculate liquidity coverage ratio, net stable funding ratio and funding concentrations, which will help the banks to measure their liquidity strength as per the Basel III regulations.
Basel III implementation has emerged as a challenge for regulatory, capital and liquidity risk managers owing to the current stringent regulations. The new regulation raises the amount and quality of capital banks are required to hold, increases the capital charge for counterparty credit risk, introduces new liquidity and leverage ratios and focuses on greater risk integration and improved stress testing practices. Banks, credit institutions and clearing houses are expected to be Basel III complaint before 2013.
Apart from Basel III compliances, the Financial Services Liquidity Risk Management software will also enable banks to adhere to other important regulations such as Dodd-Frank Act and Individual Liquidity Adequacy Assessment Standards of the Financial Services Authority (FSA) and also facilitate the internal risk management of the banks.
The Financial Services Liquidity Risk Management software can be easily integrated into existing Asset Liability Management (ALM) systems, which are already deployed within institutions, such as Oracle Financial Services Asset Liability Management. The new software provides a comprehensive set of pre-configured templates and dashboards covering the regulatory and risk management reporting requirements of a bank.
Oracle did not mention whether the software could be integrated with non-Oracle based systems, but going by what it has done in the past, we don’t think that is likely.
Post the Great Recession, liquidity risk management has garnered significant attention from bankers all over the world. According to Chartis Research, the market for liquidity risk management and ALM solutions will grow to $223.0 million by 2013, driven by higher expenditures from banks in the emerging markets of the Asia-Pacific, Latin America, the Middle East, Eastern Europe and Africa. We believe that the new software will boost Oracle’s banking customer base in these emerging countries going forward.
We also believe that the new software will enhance Oracle’s competitive position in the risk management software market for banking companies, which is fairly crowded with tech giants like International Business Machines Corp. (IBM), Moody’s Corp. (MCO), Misys Plc., Infosys Ltd. (INFY) and SAS over the long term.
We remain Neutral on a long-term basis (6-12 months). Currently, Oracle has a Zacks #2 Rank, which implies a Buy rating on a short-term basis.
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