INESC TEC develops system to facilitate risk analysis in banking

Analysing risk in banking systems requires the thorough and detailed assessment of millions of economic and financial indicators on a daily basis, which risk analysts have to perform in order to make decisions in credit operations or wealth management, for instance. In this sense, INESC TEC collaborated with Natixis, a French investment bank operating in Portugal, to develop a solution to detect anomalies in financial data series through algorithms.

“Market transactions are subject to market risks due to the changes in underlying risk factors such as stock prices, interest rates, currencies, etc. At Natixis, as in any bank, monitoring market risks involves handling of very large datasets that may contain some data anomalies. In order to improve our ability to detect and correct such anomalies, we have worked with INESC TEC to investigate innovative solutions to support the daily work of market risk analysts.” explained Florent Soland, Head of IT at Natixis in Portugal.

“Up until now, the data were presented to the analyst sequentially on a website and analysed one by one. Whenever the analysts faced strange values, they’d stop their analysis and try to understand the origin of those values. In this sense, we tried to automate the detection of errors in the so-called vega values i.e., volatile asset values, and to understand the cause of said errors, in order to facilitate the analysts’ work in the evaluation of the investment risk”, explained João Mendes Moreira, researcher at INESC TEC’s Artificial Intelligence and Decision Support Laboratory (LIAAD), professor at the Faculty of Engineering of the University of Porto (FEUP) and head of the project.

In order to do that, the researchers resorted to data mining and machine learning techniques, which they applied to Natixis’ risk assessment systems.

This contract is part of the portfolio of projects carried out by the specialized structure that INESC TEC created to meet the needs of entities in the financial sector, in their journey towards digitalisation processes. For this purpose, INESC TEC uses Artificial Intelligence and other advanced technologies applied to financial processes, such as risk analysis and fraud detection, among others.

The INESC TEC researcher mentioned in this news piece is associated with UP-FEUP.