Reference no: EM132228555

Financial institutions across Europe must improve their data management practices if they are to comply with the demanding legislation that arose in response to the global fi nancial crisis of 2008. Banks must comply with numerous regulations developed by various authorities around the globe. These regulations require banks to report how much capital they hold and to document how they report risk. In Europe, these regulations include Basel III affecting capital ratios, the European Central Bank demanding faster and more detailed reporting with MFI 3, and the European Banking Authority developing new fi nancial reporting with Finrep. Meanwhile, in 2010 the United States passed the Foreign Account Tax Compliance Act (FATCA), which also places greater reporting requirements on banks operating in this country. The new regulations, together with ongoing business challenges, made data vitally important at Nordea Bank AB (www.nordea.com). As a result, the bank implemented a data warehouse. Nordea, which is headquartered in Stockholm, Sweden, advertises itself as “the largest fi nancial services group in Northern Europe.” Although the institution has a long history, the modern organization was formed in 2001 when major banks in Norway, Sweden, Denmark, and Finland merged their resources and operations. Today Nordea has more than 1,400 branches that conduct business in 19 countries. Its clientele includes 10 million private customers and 600,000 corporate clients. The group also operates an Internet bank, which services 6 million online customers. Nordea’s fi nance group agreed to lead a data warehouse project with a budget of €100 million. The project was managed by the fi nance group because that group “owned” the data and the data-management processes. The project had two overriding objectives: to improve customer service and to comply with all relevant regulations. As noted, Nordea was created from the merger of four separate fi nancial institutions, each with its own legacy information systems. (A legacy system refers to outdated information systems or application software that is used instead of available upgraded versions.) Data at Nordea were governed by manual processes, stored on spreadsheets, and managed locally. This arrangement was inadequate to meet the demands of a modern global banking system. As a result of these data management problems, the most important principle for the data warehouse was to create a single version of the truth. Consequently, the fi nance team built common data defi nitions and master data necessary to compare variables across geographies and business functions. Based in Stockholm, the data warehouse stores 11 terabytes of data, including more than 7 billion records. Nordea deployed the data warehouse with impressive results. Reporting lead times decreased from eight to four days. This process enabled the bank to conduct analyses more quickly and accurately at lower costs. All managers and fi nancial controllers now receive the branch results in the same format, at the same time. They can drill down to the customer, account, and product data, all from the same coherent, consistent source. The data warehouse enabled Nordea to introduce a customer profi tability application for customer relationship managers. These managers can more easily prepare for meetings with customers because they do not have to obtain customer data from different databases. The current fi nancial climate requires banks to focus more carefully on compliance. The data warehouse enabled Nordea to meet relevant regulatory requirements more quickly and accurately. Further, the reduced costs of compliance enabled the bank to reallocate capital to address needs in other areas of the business. Nordea continues to thrive. In the third quarter of 2014, the bank added new customers and reported more than €250 billion in total assets under management. Finally, the bank’s loan loss level is below its 10-year average.

1. What are other advantages (not mentioned in the case) that Nordea Bank might realize from its data warehouse?

2. What recommendations would you give to Nordea Bank about incorporating Big Data into its data management? Provide specifi c examples of what types of Big Data you think Nordea should consider.