Cloud, big data helping ‘stress test’ mortgages

Acting group executive for Perpetual Corporate Trust, Richard McCarthy

The Royal Banking, Superannuation and Financial Services Industry will drive increased adoption of RegTech solutions in Australia according to Richard McCarthy.

“I think regulatory technology solutions will be a driving force for how the banking and financial services industry can continually improve their business,” the acting group executive for Perpetual Corporate Trust told Computerworld.

Perpetual Corporate Trust is one of the three arms of Perpetual Ltd, which is one of the nation’s largest wealth management businesses and in addition to providing corporate trustee services has an advice business targeted at high net worth individuals.

“We are focused on supporting clients with their credit risk and regulatory reporting requirements going forward — and also obviously how they best support their customers and that customer experience,” McCarthy said.

Perpetual Corporate Trust has built a cloud-based platform using Microsoft Azure and leveraging its masive collection of data. The latest addition to ABSPerpetual Business Intelligence is a Mortgage Market Insights module, McCarthy said.

Post-GFC there has been a global focus on mortgage stress testing, which McCarthy described as a “big piece of work” for an organisation — requiring not only the ingestion vast amounts of data but building a model that can assess the probability of default and loss.

“It’s really looking forward four, five years and predicting the actual dollar losses which the bank and the financial services community may take if there are certain stress scenarios,” he said. Perpetual’s platform can deliver it as a service.

Since 1997, Perpetual has been involved in the collection, validation and storage of data on behalf of the public securitisation market, acting as the market’s data warehouse. In 2012, the Reserve Bank of Australia mandated new data standards for the banking and financial services industry as a condition of access to the RBA’s Committed Liquidity Facility (CLF). Those changes took effect in 2015 and massively expanded the data managed by Perpetual.

“Essentially we’ve been collecting hundreds of millions of lines of data for 20 years,” McCarthy said.

“It was an interesting time between 2012 and 2015,” he said. “We were essentially processing $100 billion worth of mortgages a month — to, post-implementation of the reporting through to the RBA, $330 billion worth of mortgages a month.”

At the same time as the Perpetual data warehouse was groaning at the seams, there was what McCarthy described as a “seismic shift in the digital landscape,” with cloud technologies offering new ways to make sense of big data.

Perpetual used Microsoft Azure and the Cortana Intelligence Suite to build its platform, which can help Australian financial services organisations stress-test their mortgage portfolios, with Power BI providing visualisations.

Other new modules added to the Perpetual platform support credit stress testing and the IFRS 9 accounting standard.

“Typically you wouldn’t say Perpetual Corporate Trust is the obvious choice to be a digital innovator in the market – from a trustee perspective we are a fiduciary business – but that underlying data warehouse component has allowed us to start exploring new ways to support our clients, new ways to support the industry and markets,” McCarthy. “Today we have a cloud environment which provides transparency and comparability into the public securitisation market.”