KAS Bank Speeds Compliance

As the global regulatory climate continues to change rapidly, European financial institution KAS Bank is moving all of its back-office operations – including those related to helping other banks with compliance – from the mainframe to a Microsoft .NET environment.

First established in 1808, KAS Bank specializes in wholesale securities services.

With total migration to Windows set for completion in 2010, the bank went live in September with the initial stage in the phased rollout at its headquarters in the Netherlands. Although some applications still remain on the mainframe, KAS Bank is now up and running with Windows Server 2003, BizTalk Server 2006, BizTalk Accelerator for SWIFT, and several other components of its emerging .NET architecture.

KAS, an early adopter of the SWIFT network, now relies on SWIFT for 95 percent of the transaction processing messages needed for processing payments, settlements, and corporate actions for its customers, estimates KAS Bank CIO Pim Van der Horst.

Anywhere from 50,000 to 100,000 SWIFT messages flow through the bank each day. “This demands an environment of high availability and high reliability,” says Sheida Hadji-Ashrafi, Microsoft’s worldwide industry manager for payments.

Traditionally, KAS used a mainframe running Adabas, a database from Software AG, to handle this huge messaging volume. Over the past 20 years, the bank has built myriad applications running in this environment, amounting to 5 million lines of code. Yet maintaining and updating all of this code has proven time consuming and costly, according to Van der Horst.

Upon deciding to adopt a new approach, the bank recently set about evaluating different solutions. After extensive testing, Microsoft’s proof of concept solution topped those of its competitors in both performance and cost, says Van der Horst.

“Operating expenses [are reduced] because the bank is buying a package and not building code,” he says. Windows is “relatively inexpensive” compared to other systems, adds the CIO.

Meanwhile, BizTalk Accelerator for SWIFT is able to deliver updates for regulatory compliance automatically, reducing risk and eliminating the need for time consuming manual updates. The bank receives an annual message pack from Microsoft containing a new version of BizTalk Accelerator for SWIFT, with all the needed regulatory changes built-in, according to the KAS Bank executive.

SWIFT supports a number of regulatory standards that are increasingly important in the European market, including Single Euro Payments Area (SEPA), TARGET2, Basel II, and Markets in Financial Instruments Directive (MiFID).

“SEPA is the new driver in Europe right now,” says Microsoft’s Hadji-Ashrafi. SWIFT’s value proposition for SEPA calls for developing standards, products, and services that will provide the common denominator between competing clearing and settlement mechanisms across Europe.

TARGET2, on the other hand, is a settlement system based on the Single Shared Platform (SSP) developed by three European banks. Operating this system on behalf of the Eurosystem, the TARGET2 participants are utilizing the full set of SWIFT’s messaging services, including FIN, FIN Copy, InterAct, and Browse.

Basel II has set up requirements meant to make sure that a bank holds capital reserves appropriate to the amount of risk the bank exposes itself to through its investment and lending practices.

MiFID demands that banks confirm “best execution” in transactions, for example. “It is now easier for us to provide MiFID-related information to our customers with more data from the system,” Van der Horst says.

The back-office mainframe systems slated for phased replacement at KAS include MINT, a system from SunGard for connecting to SWIFT and a SWIFT gateway; Mercator, for mapping SWIFT messages to proprietary systems; and IBM’s Merva for sending messages to the mainframe. KAS Bank is already implementing an IBM MQSeries adapter for BizTalk, according to Hadji-Ashrafi.

The bank also has started using SQL Server Reporting Services for formal reporting. The reports are available much faster now, and queries can be created by end users, instead of just IT professionals, Van der Horst says. Up and running at KAS Bank, too, is Microsoft SharePoint to support a new portal application.

Meanwhile, a team of internal developers at KAS, trained by Microsoft, is using Microsoft .NET C# for conversion of some legacy applications to the .NET environment.

Along the way, members of the Microsoft Europe, Middle East and Africa (EMEA) team also have been working closely with KAS employees to provide expert knowledge of the various systems being implemented by the bank and to help with systems integration.

Two Microsoft partners – Atos Origin and Inter Access – have assisted with benchmarking, along with auditing of volume and reliability tests.

“Every day we are moving closer to having all operations in the new environment. We have been impressed by the performance of Microsoft technology,” says Van der Horst.

www.kasbank.com