:1e"'~-~·""""-A"'~~-:;"'-;'~",,,,~.,,~,,~,:",,,-"\,~,?>~'i:.:('~~:;'-~'- - '-- -'-" ~,

1

I.

ll.

dr. Gyorgyi Virgula: Executive Information System in Banking area

INTER-EUROPA BANK RT.

BACKGROUND:

INTRODUCTION:

Inter-Europa Bank is a medium large joint.;.venture ( main shareholders is

Istituto Bancario San Paolo Bank) commercial bank, it was established in

1981. During the last five years the Bank was in the best five banks in

Hungary. Inter-Europa is specially focused on the medium large (or large)

customers with good qualifications, and started its retail activity in 1993.

HARDWARE AND SOFIWARE ENVIRONMENT, NECESSITY OF EIS

The Bank is established it's Executive Information System (EIS) in 1992,

and from this time it is continuously developing. This system is specially

made for the top management of the Bank (member of the Board, general

manager and executive directors). The EIS is working and calculating all of

the figures on daily basis, and handling approximately 2 year-long trend

and daily database, helping the prognostic and planing procedure.

The Bank has an AS/400 hardware, and on it, working a MIDAS software

(from the BIS London) offering a multi-currency system, general ledger

possibility, daily accrual of interest rates, daily balance sheets, profit and

loss accounts ... MIDAS handle 95% of the Bank activity, but in it there is a

limited possibility· to use or to analyze together the information of each

modules, or to restructuring this information base. Due to this limitation

Dr Gyorgy Virgula (+361) 111·8488, Budapest, Szabadsig tar 15., Hungary

312

m.

IV.

the top management of the Bank really need a concentrated, analyzed,

calculated information base which is focused on the key point of the bank

activity and operation.

Questions, for what the lecture will give answers:

1: Requirements of a banking EIS - comparing to the EIS of the other

industries.

2: Logical way of EIS's development.

3: The information - and users level of EIS - "tip of the iceberg".

4: Structure of the each information level.

5: Plan of developing.

GENERAL REQUIREMENTS:

U1UITIES AREA

4.1. Strategy planning procedure

4.2. Supporting financial planning

4.3. Supporting decision makers

4.4. information base for controlling

Dr Gy6rgy VirguJa (+361) 111-8488, Budapest, Szabadsag t6r 15., Hungary

313

.' '. -~., -.. - .... -- -- --

".- ~ . - - - . _ .. ".

'~.

Development of a Multi-purpose Strategy 1

* Technology * Skills, Supply * Market

2 ..

r~~~~~~~··~:~·~;~~~···lilll

L~·

Changing Areas

Features In the changing environments.

Strengths, Weaknesses

5 ............................... ", ........................... "

t Purposes, Goals

: * Stability of the Profits : * Growth of the Equity

Possibilites Critical factors

of success Planning procedure

Results

If we leave

Dr Gyorgy Virgula (+361) 111-8488, Budapes~ Szabadsag tar 15., Hungary

314

* Regulation * Economy * New Entrants

.. ~ •....••.....•... - ....•...••....•••...•••••...

,··«··················t······························· ...... .

Feedback

How Often? EIS

~r~='X"',",=';"'''''=O:\""",'''''~'''''< - --""''''''''''''-"",.. """-."",..,.;;-,,-,,~:e.--""""~';"_~"l-~"l...-_~_,,-"'--~.-_~

I ~ v.

VI.

MULTI PURPOSE SAS USE

MJL TI-FLtJCTIQ\J SAS USE LOGICAL STRlJCT1R: a= EXEClJ11VE 1N=0RIVL4T1Q\J

SYSTBVI

LOGICAL WAY OF INTER EUROPA BANK'S EXECUTIVE

INFORMATION SYSTEM

STANDARD INFORMATION NECESSITY OF EIS

IN ANY COMPANY IN BANKS:

1. Sales (Quantity, volume) 1. Volume, total assets, stocks

2. Quality 2. Profitability and risk of services

3. Profitability 3. Profit and Loss account

4. Market position 4. Market position

5. Plan realization 5. Utilization of financial plan

Dr Gyorgy Virgula (+361) 111-8488, Budapest, Szabadsag tar 15., Hungary

315

-.-.-.-,...--." _. __ ._e __ • _. -_._~-~--_--_-.<, .. '~ .~-,_-.~.-,,'_ .~._ .. __ ... _~ ~._:_.-J __ :_.~:_ .• _."_ .. _- _ _:..

MAIN PART OF EIS:

1. CONCENTRATED INFORMATION ABOUT TOTAL ASSETS AND

PROFIT:

In the first screen the executives managers can find the main important

figures in several form. These are the daily data of total assets and profit,

showing them in number form, showing the changes in % (comparing to

previous day) on the type of screen, and they can also see the daily data

base trends of the actual business year and comparing it to the previous

year's trends also.

l.SUMMARY TABLE:

Showing the following main important indicators of any companies, and of

the bank also:Cyou can find them on daily bases, collected together five

working days, and a changes column)

1. total assets

2. total income

3. total expenses

4. profit of the day

5. Shareholders" funds

If there is any more interest the users can go down and down to the

system for having more and more information. How can they do that?

There are able to go down through the following four logical way:

Dr Gyorgy Virgula (+361) 111-8488, Budapes~ Szabadsag tar 15., Hungary

316

2. VOLUME: TOTAL ASSETS:

2.1.STRUCTURE (MAIN GROUPS) OF ASSETS AND LIABILITIES

2.2.STRUCTURE OF ASSETS AND LIABILITIES BY BRANCHES

These tables show together five working day data, which means business

week together, and in the last column we can find the volume of changes

comparing it to data of previous day. We would like to emphasize the

direction of changes, and due to it we used the three main color. Red:

reduction, yellow: stabile without heavy changes, green: growth.

In these screen the users can find the items of assets and liabilities

calculated them in the following structure:

*

*

*

grouping them by sectors: government, corporates, banks,

private individuals

grouping them by periods: assets and liabilities within one year,

and over one year

grouping them by foreign or domestic customers

2.1.1. and 2.2.1. (by branches) DRILL SCREENS:

When the managers would like to know more details about these above

mentioned groups, they can click with using mouse, any number on the

screen. If they do it, after a minute they can get information any product or

service of the Bank, which take part in the choose group. For example: at

the liabilities side in over one year own funds group you can find the last

two days stocks of the following items: 1. capital base, 2. retained

earnings, 3. profit of the year, 4. profit of previous year,S. reserves etc.

Dr Gyorgy Virgula (+361) 111·8488, Budapest, Szabadsag tar 15., Hungary

317

'1i"''l'''=o~=,-"=""",,",,,,,""===-==,,,,,,,=-~·,,,o·.'E''''·'-"'"'--,.' ) ;;

These level of infonnation based on the general ledger balances of the

bank.

3. PROFIT AND LOSS ACCOUNT:

Main table: showing a week together, with colored changes column. There

are two version of this table: the first one is calculated the following

methods on cumulated basis (started the calculation on the 1st of January

and finished it on the current day, the second type is the monthly basis

calculation, which started on the first day of the month and do it until the

end of the month, and start it again. This two way of calculation makes the

managers able to comparing the changes of the profitability tendencies, to

comparing the average interest rates of the month to the whole year, and

emphasize for them the changes direction of the interbank interest rates

trends. These type of calculation offer a good tools for planning managers,

help them in a prognostic procedure. Average stocks and average interest

rates, their changes is a very important infonnation base during the

controlling and planing activity.

DRILL SCREEN OF PROFIT AND LOSS ACCOUNT

You can choose any number of the screen, and if you click on it with

mouse, you can find more infonnation, and the breakdown of them.

4. STRUCTURE OF PROFIT AND LOSS TABLE:

Interest income (for the forint (HUF) interest bearing assets)

On the drill screen behind of the main table the managers can find the

daily basis calculated average stocks of any type of interest bearing assets

Dr Gyorgy Virgula (+361) 111-8488, Budapest, Szabadsag tar 15., Hungary

318

in forint, and the income earned by it. So after a simple calculation we can

get the average interest rates of each of the products.

Interest expenses (for the HUF interest bearing funds)

Drill screen: like· in the above mentioned but show the data of the

liabilities side, calculate the average stocks of each type of deposit, and

you can see their cost also.

Interest income

Income (commissions) of services

Drill screen: Commissions earned by current account, documentary

transactions, EUROCARD project etc.

Cost of services

(For example the cost of money transfer)

Profit on services

Income of foreign currencies transactions (loans and money market deals)

Drill screen:interest income of FC loans

fees of FC loans

income of swap transactions

income of forward, and other future transactions

interest income of our FC deposit on money market

expenses of foreign currencies transactions (fees and interest paid)

Dr Gyorgy Virgula (+361) 111·8488, Budapest, Szabadsag tar 15., Hungary

319

Profit on Fe activity

Other net income

(Earning of given guarantees, leasings, investments etc.;)

Overhead expences

(Salaries, paid for used services, electricity etc .. )

Taxes

Provisions

(Minus with the value of the provisioned risk reserves for possible losses)

Net profit

5. MARGIN CALCULATION:

STRUCTURE OF mE MAIN TABLE:

BASIC POINTS:

The table is calculated on the FORINT (HUF) actives base, without handle

information from the foreign currency transactions. It is necessary to

divide the activity for this two main part because of the following reasons:

* it is impossible to compare the profitability of the forint activity to the

deals in foreign currency, the forint (domestic currency) is not convertible

* for any economist of the world is necessary to calculate the profitability

of each products by each type of currency, because of their different

interest rate basis, different expectation of their changes, several trends of

Dr Gyorgy Virgula (+361) 111·8488, Budapes~ Szabadsag tar 15., Hungary

320

!""[ ____ ~- ~'~~3C~~',~~~~-c~-_ --

,

exchange rate's changes, the macroeconomie backgrounds are not the

same etc.

* high inflation rate (15 to 30 %) in Hungary in the last few years

* difficult giving prognosis for a current changes interest rates

and for the forint devaluation during the business year

This table is available in cumulated and in monthly basis also.

Like in all of the other tables you have a possibility to go back until the 1st

January in last year. During this period you can see all of the details, and

you can use the drill screen possibility for having more information also.

The system offer to you to go back by week or by day as you like. In the

last comparing (changes) column you can find the differences between the

last day (as you wanted it before) and with the previous day of it.

ROW TITLES AND INFORMATION:

I.Total of interest bearing assets (average stocks)

Drill screen:

First column:

You can find any product of the bank in domestic currency: all type of

loans, statutory reserves, domestic interbank transactions, bills of trade,

bonds and securities etc.

Second column:

The average stocks of the above mentioned activities

Third column:

Dr Gyorgy Virgula (+361) 111.8488, Budapest, Szabadsag tar 15., Hungary

321

~'l ",-",~-""""'~"'?'r~-'~~""-"'---"'""'--""-~~":.-'~_'"'--'--"'_-_-:.-_-'

;-:~

:) .,

The income of the each product

II. Total interest income

Drill screen gives the same information like the previous one.

ID. Average interest rate (0/0)

IV. Total of interest bearing funds (average stocks of liabilities)

Drill screen: structure is the same like in the total interest bearing assets

side but giving information about the liabilities

v. Total interest expenses

VI. Average interest rate of funding (0/0)

VII. Net interest margin (0/0)

VIII. Spread (0/0)

5. TURNOVERS

5.1. About the active, asset side

5.2. About the passive (shareholders'" funds and liabilities)

portfolio

In this two tables the managers can follow with attention all of the bank's

products, seeing their turnover on monthly and cumulated basis. The

structure of the table give a possibility to compare the actual stock and

Dr Gyorgy Virgula (+361) 111-8488, Budapes~ Szabadsag tar 15., Hungary

322

-.-, -.- --.-. - ~~-.. --: .- -:'/':::~~'.~"~"~~~J .• __ ~~_-:'Y_'

turnover of them. You can find the answer for the following question in

this table: What is the changes direction of any products? ,

6. FINANCIAL PLAN UTILIZATION

Every table has an extra column with plan-data and utilization in % format.

VU. DEVELOPING PLAN OF INTER EUROPA BANK'S EIS

7.1. MODIFICATION OF TIlE CURRENT STRUCTURE:

* giving a possibility for moving between the tables without always using

the main menu

* there is an automatic calendar on the screen for making going back in

the period on a smoother way

* giving new structure of tables for making proper plan analysis in any part

of the system

* offer a possibility to using graph without heavy tables

7.2. SCREEN DESIGNER

* offering a tool for the EIS developer manager and make her able to set

up new tables automatically

* giving possibility for the new table to show them on the screen with

using this tool

Dr Gyorgy Virgula (+361) 111-8488, Budapest, Szabadsag tar 15., Hungary

323

1 ,

.1 ! I L

* setting up a well organized SAS method set, which help you to tell the

system how to calculate any of the information level of the new tables,

* showing a table set about the possible information base from the MIDAS

data base

* new graph handling methods as a part of a screen designer tools: after

testing you can directly input it for the top managers screen automatically

After all we need time and time for realization of the above mentioned

dreams.

I hope and 1 am sure that in SEUGI'95 we will see this new application as

a part of Inter Europa Bank's Executive Information System. And finally

we just need good luck.

Dr Gy6rgy Virgula (+361) 111-8488, Budapest, Szabadstg tar 15., Hungary

324

." '-. , "_" _ "_' ~~ • ,_'_"',_~: ~ __ ~ ~ ." ~ '.~ • __ J

J _ ." ,. __ • _ _ ~. ~_ .. ,.. ,,,-·,_c·~~v_~_~ ~_ •. _~ ___ .;; ____ . __ .. _ ~~ ,. ~~'-.