Fiscal fusion

The merger between Emirates Bank and the National Bank of Dubai was one of the largest ever in the Middle East. In a exclusive interview, Emirates NBD speaks for the first time about the challenges and successes merging the IT systems of the banks.

Tags: Banking and financeEmirates Bank InternationalEmirates NBDNational Bank of Dubai
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Fiscal fusion Naushad Kermalli.
By  Ben Furfie Published  January 6, 2011

The merger between Emirates Bank and the National Bank of Dubai was one of the largest ever in the Middle East. In a exclusive interview, Emirates NBD speaks for the first time about the challenges and successes merging the IT systems of the banks.

When the official news agency of the UAE announced that Emirates Bank and the National Bank of Dubai were to merge, the news took not just consumers, but the Central Bank, Dubai Stock Market, the media, and even the public relations departments of each bank by surprise.

Sources within the establishment, as well as the two banks confirmed to Arabian Computer News’ sister title Arabian Business that the deal had been agreed with the blessing of the emirate’s ruler, Sheikh Mohammed Bin Rashid Al Maktoum “at the wish of the banks to create a strong banking body”. The merger created the largest financial institution in the region, leapfrogging the National Bank of Abu Dhabi in terms of assets.

However, while the media and analysts debated the impact of the merger – not just at a local level, but also an international level – the IT departments of the two banks were meeting to work out how to manage the mammoth task of integrating the systems. “No matter what you do with the business units, unless you can merge the IT systems, you cannot have two banks operate as one.” As an anecdote, it vividly explains the headache that faced Naushad Kermalli, who at the time had recently been chosen to lead the integration of the two banks’ IT systems as senior vice president, business technology relations and IT post merger management. Kermalli, who these days is the deputy general manager of ITO strategy (planning and implementation) and group operations processing, doesn’t beat around the bush when it comes to the scale of the issue, especially as it was him and his team that drove forward the idea of not just merging the two banks’ IT systems at the same time as the general merger, but overhauling the core banking systems – essentially the heart of the new bank’s IT operations. “Some people thought: are you crazy!?” he reveals. “The merger itself was complex enough – why should we, in addition to that, undertake a core banking replacement?, they would ask.”

However, as Kermalli reveals, the IT team wasn’t starting from scratch when it came to implementing a new IT core. Prior to the announcement of the merger, Emirates Bank had already embarked on an upgrade of its core banking systems. “Banks will not simply replace core banking every few years,” he says, emphasising the scale of the project. “You need a generation, a quarter of a century sometimes – the last time Emirates Bank changed its core system was 25 years back.” The fact that Emirates Bank was already in the process of evaluating a core banking system undoubtedly sped up the process, but as Kermalli reveals, the system Emirates Bank had originally settled on wasn’t always guaranteed to win the final contract. “When the merger was announced, we said stop. We had already identified, we had architectured the solution in terms of how we wanted it done. But now we said wait.”

The main reason behind the delay, Kermalli reveals, was down to Emirates Bank’s IT department not knowing how different the core banking system actually was. While it was known that National Bank of Dubai was running a Misys solution for its core banking systems, it – as are all banks – was incredibly secretive about the actual details of the solution: no surprise as the core system is where the most sensitive and valuable data is stored and processed, and the information hackers and criminals can reek most havoc with.

This lack of information on NBD’s IT systems, Kermalli reveals, cast doubt on whether the core banking system Emirates Bank had been working on prior to the announcement would survive. “Right from the time the merger was announced, the two teams – IT and operations – of the banks got together to look and decide first and foremost to take an inventory of all the applications and systems that Emirates Bank had, and all the systems and applications and infrastructure that the National Bank of Dubai had,” he says. “We had to go through everything and find out what business line and which business function each of those applications served. That took about three to six months to do, and it ended up being a long blueprint of the two bank’s entire IT and operations infrastructure.

“When we had completed the inventory, we said ‘okay, what are the commonalities of these applications, where they serve similar types of business functions within the banks,” he continues. “We listed those, we identified those. Then we looked at the processes and looked at which applications should survive and which should be retired. You cannot have two applications performing the same function, obviously.”

It’s not hard to see why Kermalli was chosen to lead the integration between the two banks. He has an immediate presence, one that exudes an aura of positiveness, as well as keen intelligence.

“We were acutely aware it would take two years to merge, so we didn’t want to choose an application or a system where the moment the merger is complete, you need to start looking for a replacement. Once we had concluded the inventory and function analysis, we asked ourselves whether we should continue with the replacement of the core systems, or if it was good enough, merge Emirates Bank into the National Bank of Dubai’s systems. However, NBD’s systems failed our tests. Both of the systems were not of a nature that would give the merged bank the advantage it sought post-merger,” he says, banging his fist on his desk to drive home the message.

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