Battle of the banks

November 15, 2018

Battle of the banks is Simarch developed bank simulation competition run by ICAP training solutions together with Thomson Reuters. Teams representing 30 banks across the African continent are expected to run a complete bank balance sheet with standard commercial banking activities in a simulated macro-economic environment for 4 quarters. Most components in running a successful bank require a balance between making money, maintaining regulatory capital ratios and protecting the balance sheet from adverse macro and socio-economic events, in short; multiple optimisation objectives.

 

This year's Battle of the Banks competition, aimed to upskill and pass on knowledge to young financial market players, was hotly contested by teams from across the African continent. Out of the five finalists, the Big Bank Theory team (representing FirstRand RMB South Africa) came out tops, with members Hezekiah Olaogun, Lindy Riphagen, Ross Gothin, and Surgor's very own Thloni Masipa.

 

As part of the winning team’s strategy, a very simple goal seek approach was adopted with every financial quarter when inputting decisions into our simulations. One simple example entails the adoption of goal seeking the right number of credit assets per industry segment needed to be sold, whilst maintaining the cost of funding those assets and having a minimum spread to at least break even. The goal seek would give an indication of the maximum nominal value in asset that could write/sell, given the amount of funding available and the minimum net interest margin wanted to make in the credit business for a segment (Corporate, Infrastructure and building, property, home loans, personal loans or Information Technology).

 

This is just a reminder that OR is not too far off the thinking and basic application required in everyday industry decision making, even if it is simulation.

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