Intesa Sanpaolo Migrates Risk Management System to Red Hat Enteprise Linux

August 2, 2011

Customer: Intesa Sanpaolo

“The migration to Red Hat Enterprise Linux has enabled us to deliver the Value at Risk (VaR) numbers early each day to ensure we have a forward-looking analysis of our risk profile.” Gianni Ferrari, team leader of the Linux porting project at Intesa Sanpaolo.

Country: Global


Business Challenge:

To improve market risk management system, extend functionality, and reduce hardware spend

Migration Path:

UNIX to Red Hat Enterprise Linux

Software:

Red Hat Enterprise Linux

Hardware:

Intel-based servers

Benefits:

Reduced total cost of ownership (TCO) by over 50 percent; increased scalability, high availability, and disaster recovery

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Background:

Intesa Sanpaolo is a banking group resulting from the merger between Banca Intesa and Sanpaolo IMI. It has a leadership position in the Italian market for all of its major business areas (retail, corporate, and wealth management), where it serves over 11 million customers through a network of approximately 5,800 branches. Intesa Sanpaolo also has a strong international presence focused on Central-Eastern Europe and Middle Eastern and North African countries with a network of more than 1,700 branches and 8.4 million customers of subsidiaries operating in retail and commercial banking across 13 countries. Intesa Sanpaolo intends to become a benchmark for the creation of value in the European banking sector. Intesa Sanpaolo’s international network is dedicated to supporting corporate customers. It is present in 29 countries, in particular the Middle Eastern and North African area and those areas where Italian companies have a strong presence, such as the United States, Russia, China, and India.

Business Challenge:

Calculating risk and risk management is critical for Intesa Sanpaolo to ensure reliable and sustainable value creation and to protect the company’s financial solidity and reputation. Intesa Sanpaolo's internal risk calculator model, as approved by the Bank of Italy, calculates market risks and then provides the Value at Risk (VaR) numbers, also known as the risk measure, to chief traders and to the Bank of Italy on a daily basis. Supporting an internal model reduces Intesa Sanpaolo capital requirements.

The insufficient capacity provided by Intesa Sanpaolo’s legacy systems was unable to support the hundreds of thousands of simulations necessary to calculate market risk and prevented the company from generating a comprehensive and consistent risk profile.

Solution:

Intesa Sanpaolo’s Market Risk department, supported by its dedicated IT team, moved to implement a distributed environment to overcome the capacity constraints of its previous single SMP server. All new hardware installed runs on Red Hat® Enterprise Linux®, which replaces the organization’s previous legacy UNIX system. Moving from a legacy monolithic server, Intesa Sanpaolo chose to acquire many mid-to-small Intel-based servers running Red Hat Enterprise Linux, spreading all calculations over a grid of non-expensive nodes. Base software and applications, including databases, web, calculation engines, reporting system, and more, have been successfully ported to Red Hat Enterprise Linux, including several third-party modules.

Benefits:

“We started building the market risk management system in 1997,” explains Ferrari. “We have constantly increased the range and complexity of instruments since then, along with portfolio coverage. We realized that we needed a change in technology. With Red Hat Enterprise Linux we gained expanded performance and scalability, in addition to saving significant hardware budget.”

Intesa Sanpaolo’s total cost of ownership (TCO) has been reduced by more than 50 percent and the company’s increased scalability allowed for new computations to be performed for further cost savings. In addition, the current distributed architecture is suitable for high availability and streamlined disaster recovery to ensure seamless business continuity.

“We are continuously improving our technology infrastructure and tuning our software to follow the business specifications handed over from our financial engineers. The migration to Red Hat Enterprise Linux is a key factor in tackling the challenges of this evolution and allows us to calculate complex risk measures in a timely manner,” adds Ferrari.

“The migration to Red Hat Enterprise Linux has enabled us to deliver the VaR numbers early each day to ensure we have a forward-looking analysis of our risk profile. In addition, the migration has allowed us to calculate additional complex counterparty risk measures (ie. expected potential exposure, credit value adjustment), which was not possible with our legacy system,” concluded Ferrari.

From 2001, the internal model of Banca Commerciale Italiana has been extended to Banca Intesa and Banca Caboto, then to BancaIMI and Intesa Sanpaolo after the merger in 2006.

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