What happens behind the scenes in financial markets? A team of risk managers and traders protect customers and the Bank’s assets — equities, bonds, etc. — against market shifts. They do this with the help of valuation adjustments — or XVAs — to assess the true cost of potential trades and the level of risk involved. XVAs aren’t new to financial services, but what Scotiabank is doing with them is.
XVAs are one of the largest computational challenges banks face. So, Scotiabank built a high-performance XVA risk engine to calculate valuations and risk levels. It performs 915 million calculations per second — faster and more accurately than ever before. In fact, in 2021, this innovative technology caught the eye of the industry, winning Scotiabank the Risk.net award for Innovation in Technology.
“Our XVA platform provides traders and risk managers with better insights across asset classes,” says Stella Yeung, SVP, Global Head of Engineering, Global Banking and Markets, Data & Analytics at Scotiabank. “And that’s proven indispensable during market volatility because our traders can run multiple-scenario analyses on the fly to inform their hedging strategy.”
The XVA risk platform uses advanced mathematical modelling and artificial intelligence to provide insights into risk. This cloud-native platform is powered by graphics processing units, the sort that are powerful enough to help generate blockbuster computer-animated movies.
That’s not the only innovation happening in the trading space.
Scotiabank manages the needs of regulators in each country it operates in. It’s a complex landscape in which Bank employees manually evaluated each trade for compliance with local financial laws.
Now Scotiabank is building a decision engine that will make the process more efficient, transparent and error-free. The engine will run on rules — using machine learning and artificial intelligence — so that decisions can be made automatically when criteria are met.
“Onboarding, pre-trade and transaction reporting are notoriously complex activities involving multiple systems and various supervisory regimes. The way we’re modernizing regulatory reporting is a powerful example of innovation in action,” says Yeung.
Managing risk in trade and having a reliable reporting infrastructure are just two of the ways Scotiabank is fostering trusted relationships globally.
“We're developing future-proof platforms that integrate directly in Scotiabank’s trading and operational infrastructure. Close collaboration with the business and the deep engineering mindset we apply to problem solving is a key feature of our tech culture,” says Yeung.
Enjoyed this story? Stay tuned for more from our Innovation Spotlight series, which showcases our leading-edge technology along the journey from code to customer. See our previous stories:
The 'trifecta' behind great digital experiences for all
The convergence of design, product and accessibility creates software experiences inclusive of everyone
How chat bots will help answer customer questions
Scotiabank data scientists are implementing machine learning to make the content search experience faster and more accurate for frontline employees
Why a Big Mac and the Bank's technology strategy are similar
In this first feature, we share how the Bank is powering local innovation and scaling it across borders