30 years of partnership: how DZ HYP absorbed decades of change with SimCorp

DZ HYP is one of Germany's leading real estate banks and a major issuer of Pfandbriefe (German covered bonds), with total assets of EUR 77.4 billion. Every security transaction the bank makes has run through SimCorp since 1996. Over the years, DZ HYP continued to choose SimCorp as it navigated the euro, the financial crisis, a merger and successive waves of regulation.

Business case

Thirty years ago, DZ HYP's predecessor was looking for a sustainable way to manage its mortgage and public-sector covered bond issuances. "SimCorp TMS 2000 in the nineties was one of the best asset management platforms for fund administration," says Pierre Schönborn. The platform met the bank's requirements, and what followed was a development partnership that over the years grew into a full front-to-back solution.

A crucial turning point came in 2018. The merger that created DZ HYP left the bank with two competing asset management systems and a complete investment portfolio to migrate.

The requirements were clear:

• One source everyone works from: Two systems meant two sets of position keys and reconciliation before anyone could agree what the bank held. DZ HYP needed every security transaction in one place, with Treasury, Operations and IT working from the same data.
• Coverage of every traded instrument: Whichever system survived had to take on everything the other held, or the split would outlive the merger. The range had to run from covered bonds to derivatives, and keep pace as markets added new instrument types.
• A foundation the bank could build on: DZ HYP builds and runs its own interfaces to integrate the platform into its wider digital landscape. The bank needed open architecture and data it could reach directly.

Solution

Following the merger, DZ HYP consolidated onto SimCorp and retired the second system. SimCorp is DZ HYP's strategic investment management platform. Liquidity management, risk management and the new lending business are the three drivers of the bank's investment strategy. All securities, derivatives and money market transactions are executed by the Treasury department and managed in one place.

All securities activity on one platform
Coverage runs from bonds, Pfandbriefe and German promissory note loans to money market transactions, repos, OTC and centrally cleared swaps, swaptions, caps and floors, FX forwards and securities lending. The platform is equally intuitive for business users and IT professionals, so Treasury, Operations and IT all work in it directly.

SimCorp is easy to use and transparent. It's adopted across the company.

— Pierre Schönborn, Application Manager, DZ HYP

Open architecture, on the bank’s term
SimCorp's open architecture lets DZ HYP develop and run its own interfaces, consolidating securities data and feeding each downstream system what it needs. Where the bank has needed to go further, SimCorp has built the integration itself, most notably the link to the SAP general ledger.

One of SimCorp's greatest strengths is the extensive knowledge and expertise of its consultants. To integrate the SAP general ledger, we wouldn't have managed without them.

— Pierre Schönborn, Application Manager, DZ HYP

Captured once, from trade ticket to general ledger
A trade is recorded once on a digital trade ticket, with Operations, Treasury and the Back Office each adding what they own to the same record. Nothing is re-entered downstream, and the general ledger posts automatically on settlement.

Ready when regulation arrives
By the time EMIR, MiFID II and the Basel framework arrived at DZ HYP, the capability was already built and proven at other banks in SimCorp's client base. Consultants came with implementation experience, and the exchange of technical and business knowledge has been as valuable as the software itself.

Business benefits

The gains DZ HYP describes are the ones that compound quietly:

Data every team can act on
Positions are recorded once and every function works from the same figures. The platform simplifies data management and builds accuracy into the process.

Being able to manage all financial instruments within a single platform offers a significant advantage. There is no need to transfer data between systems, reconciliation efforts are eliminated, and everyone involved works with the same application. This provides a consistent user experience across all functions, making processes simpler, faster, and more efficient.

— Pierre Schönborn, Application Manager, DZ HYP

Risk and reporting, ready on trade date
DZ HYP has not experienced a major system outage in over a decade, and support cases are minor and quickly resolved. Automation keeps manual intervention the exception, so risk management and regulatory reporting are never working from yesterday's numbers.

Automation and optimization with straight-through processing is a major winning factor for us.

— Pierre Schönborn, Application Manager, DZ HYP

Every strategic shift supported
Across the introduction of the euro, Basel II and III, IFRS, EMIR and central clearing, MiFID II, and the move from negative rates back to positive, DZ HYP has managed its securities activity on the same SimCorp platform. When the bank reassessed its portfolio diversification strategy after 2008, drawing on data it holds there, it spent the following decade divesting or reducing all high-risk and international investments. Each shift in regulation, strategy or instrument coverage has been absorbed by the system the bank already had.

Cloud, AI and green covered bonds
Thirty years with one platform partner is what gives DZ HYP room to evaluate what comes next with confidence. The bank is now looking at a move to the cloud. "It is the next logical step in technological innovation, opening up many new opportunities, including the use of artificial intelligence," says Pierre Schönborn. The bank expects the move to expand its capabilities in areas such as green covered bond issuance and other ESG-related initiatives.