Why Norddeutsche Landesbank Girozentrale (NORD/LB) chose FERNBACH’s FlexFinance Margin Optimiser
NORD/LB increased the income potential for its interest-based savings products by implementing FERNBACH’s Margin Optimiser.
“FERNBACH’s Margin Optimiser helps us map and monitor our core deposits more efficiently,” said Dr Michael Akmann, Head of Asset Liability Management at NORD/LB. “We found the solution convincing right from the start, because it offers a unique combination of innovative financial market analysis, in-depth research carried out by the University of St. Gallen, and FERNBACH’s technical expertise on the software side.”
Managing risk: the challenge for NORD/LB
Interest-based products provide one of the most important sources of income for NORD/LB. The uncertainty of future interest rates and cash flows in retail business presents a major challenge to NORD/LB for asset and liability management (ALM). The difficulties of dealing with such risks are compounded by customers’ withdrawal and cancellation rights, making risk management extremely difficult to calculate.
FERNBACH as first choice
NORD/LB decided to move from looking to the past when deciding what to do in the future and to switch instead to using FERNBACH’s stochastic approach to ALM. This approach implements the latest academic research concerning optimal decision making in cases of uncertainty.
FERNBACH’s FlexFinance Margin Optimiser calculates the most profitable allocation ofmoney for the present time and transparently evaluates the available alternatives by integrating future developments into the current strategy.
At a series of workshops FERNBACH hosted in Hanover, Dr Akmann was shown how FERNBACH’s FlexFinance Margin Optimiser analyses three key inputs: the volume of a bank’s savings, the current market interest curves and the actual rate of interest the bank pays to its customers. The software then uses stochastic optimisation to model an optimal replication portfolio.
